ANZ worried that it may be required to hold sufficient reserves

• mickysavage
• 5 years ago
• Categories: business, capitalism, economy, Economy, Financial markets
• Tags: anz bank

ANZ has been in the news lately for a variety of reasons, none of them good.  The latest is that the banking corporate whose local branch is chaired by the former National Prime Minister is now threatening some sort of economic genocide on the country by withdrawing back to Australia.  All because the Reserve Bank wants them to hold more capital just to make sure that if there is a run on that particular bank it will not fall over.

My initial response?  Tell them to f*(k off.  They are an Australian corporate whose only reason for being is to pull huge amounts of money out of the local economy to enrich their predominately Australian share holders.

Maybe we should invite them to act like seagulls.  Maybe the Government needs to strengthen Kiwibank and tell ANZ to leave the NZ and go back to A.

Liam Damm has the details in the Herald:

ANZ group chief executive Shayne Elliott has threatened to review the “size, nature and operations” of the New Zealand business if the Reserve Bank implements its proposed changes to capital ratios, according to his submission released publicly today.

The capital changes would see ANZ Group reduce investment and reallocate resources away from New Zealand to more profitable businesses, Elliott says.

“This may also lead the New Zealand business to reduce operational costs (including employee costs).”

It may also require ANZ Group to “dispose, or cease operation, of the relevant underperforming New Zealand assets or businesses”.

Another possibility was that some customer relationships in New Zealand could be directly managed out of Australia, he says.

Let us review recent events and what has caused ANZ to review its very profitable position in the New Zealand market.

It has:

• Lost its right to calculate its capital ratios because of a persistent failure to calculate risk, and this has been described by someone who should know as “very concerning behaviour by our biggest and most profitable bank” and “[t]his is as strong a censure of a bank as I have ever seen in New Zealand.”
• Sold to its former chief executive the palatial home that he was meant to rent out at a market rental at what appears to be a significant discount.
• Sacked the former chief executive for “discrepancies” in the way his expenses, including the provision of limousines and the storage of his wine cellar, were handled.
• Engaged in a full court press PR campaign to divert attention.

The background to this particular issue is the Reserve Bank’s review of the capital holding adequacy of the trading banks.  Basically the Reserve Bank has floated the idea that trading banks should hold more money in reserve compared to how much they lend and factoring in the risk of their loans.  The Reserve Bank is being cautious.  If there is another global financial crisis then banks holding sufficient reserves may avert a disaster.

And the claims of radical change appear to be overreach by ANZ because in January this year its risk capital holding was assessed to be 19%, well above the current requirement and even above the proposed requirement.

The other banks are also complaining.  But interestingly the IMF, the OECD and American stock market index S&P all support the proposal.

A final decision is expected in November.  Expect a lot of corporate funded churn before then.