Here’s a good article for the weekend on the likely impacts of the Murray financial system inquiry report in Australia, due to be published in about a week:
- Over the long run … could facilitate the emergence of a “big nine” set of banks to supersede the “big four”, which would be terrific for taxpayers
- This would involve a more even distribution of home-loan market share
- Could drive a dramatic increase in major bank lending to small businesses and companies as the 67 times leverage (or 1.5 per cent equity) they currently employ when lending against Australia’s housing market shrinks significantly
- More equity and less leverage mechanically yields skinnier returns on home loans, which will making lending to business relatively more enticing
- The major banks are likely to have to hold about 25 per cent to 33 per cent more shareholder capital, which will significantly reduce their leverage. This is targeted at addressing their too-big-to-fail status and the artificial funding cost advantages this implicit government backing imbues. It will be a net negative for major bank shareholders and could see their valuations correct in the near term.
There is more at the Australian Financial Review article, and it is ungated.
