The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Tuesday, July 13, 2010

The perils of Aussie banks expanding overseas: NAB forced to inject $664m into Clydesdale

I have been hammering on about the risks of Australian banks expanding into overseas markets for too long now (remember it was the absence of offshore exposures that saved our banking bacon during the GFC).

The $664 million the UK regulator has forced NAB to inject into its UK banking business, Clydesdale, could in principle support more than 10 times that amount in Australian lending. It begs the very simple question: what comparative advantage do Australians have trying to act as bankers in the US, UK, China, Indonesia, or any other country for that matter? From the Herald Sun yesterday:

"BRITAIN'S ailing financial services sector has forced National Australia Bank to inject another 387 million ($664 million) to support its Clydesdale Bank subsidiary.

NAB agreed to the fresh capital support for Clydesdale at a general meeting of the subsidiary held in London on July 1.

It is another sign that British regulators are increasing pressure on licensed banks to boost capital amid renewed concern over the stability of Europe's financial system."