Interesting comments from Andrew Cornell on NAB's belated--four years after it was proposed--support for a CMHC securitisation model (not mediated by the central bank, fyi, Andrew), and then, correctly, that APRA, the RBA and Treasury are more absurdly purist than our banks. I am not sure "purist" is the right word. Irrational maybe. The regulators are more than happy to intervene directly in the banks' business models, and impose all kinds of new requirements. But if someone else suggests a policy innovation that they have not previously advocated, it is treated as reflexively bad. It's like Ken Henry serving as Treasury Secretary for over a decade and never making any public contributions to the asset-allocation debate, nor noting how superior asset-allocation could deliver both better wealth outcomes and resolve the financial stability, funding and competitive problems that plague Australia's highly concentrated banking system. Of course, join the board of a major bank like, NAB, and then it suddenly becomes an ideal time to kick this can down the road. How absurd. It was all a little too late--as I argued repeatedly at the time, asset-allocation should have been one of the key subjects of the Cooper Review, but for some reason was almost completely overlooked:
Clyne favours steps to help shift loans off bank balance sheets – as in Canada, where the central bank mediates the securitisation of mortgages. Normally, bankers are loathe to lose loans because they contribute interest income but if there’s not enough funding it makes more sense to take fees from facilitating securitisation than to constrain lending altogether. Kelly believes more can be done to facilitate the tapping of Australia’s $1.3 trillion superannuation pool. Ironically, in this debate APRA, the RBA and Treasury are more market purist than the banks. They remain unconvinced that intervention is necessary: super funds will invest in bank debt when it is attractively priced. Meanwhile, as the population ages the demand for less volatile investments will fill the funding pool.
