Friday, October 29, 2010

Bank declares war on politician. Real wise

Consider closing your account

Australia's third largest bank has declared war on Coalition Treasury spokesman Joe Hockey saying he has "hijacked" the Liberal Party's economic credentials and comparing him to the communist president of Venezuela.

Announcing a $4.5 billion net profit, up 53 per cent, ANZ chief Mike Smith said Mr Hockey was "bashing" an industry that employed tens of thousands.

"Peter Costello was a very good Treasurer, people like Malcolm Turnbull understand this stuff and are very creditable," he said.

"But the Liberals' economic credentials have been hijacked by out-there proposals. Mr Hockey seems to be on some kind of personal vendetta, it would appear he has been taking economics lessons from Hugo Chávez."

Mr Hockey this week warned that in the wake of the financial crisis Australia's banks were expanding overseas and taking on risk in a way that might endanger the financial system.

The ANZ has the most ambitious plans for the big four, announcing yesterday a goal to expand its Asian earnings from 14 per cent of its business to 30 per cent in five years.

"I don't know why he has attacked me personally," Mr Hockey told the Herald. "But he has form"...

"He launched a vicious personal attack on Malcolm Turnbull prviously when he was leader and he went on to describe him as an investment banker who wouldn't understasnd banking."

"I am disappointed with the base level of response. But I will not be deterred."

Mr Hockey scored a win Thursday when the Senate agreed to set up an inquiry into bank fees and margins to report by March.

He also received high level indirect support in Washinton overnight with the release of an International Monetary Fund staff report on Australia.

It expressed concern that given the realively good peformance of Australian banks in the crisis "they may be emboldened to take on risker strategies".

Mr Smith scoffed at the idea of a Senate inquiry, asking "what are they going to inquire about?"

"The system is not broken. In fact the system is in extremely good shape," he said.

The Bankers Association released a graph it said showed there was nothing unusual about this year's record bank profits, but to the naked eye showed an enormous increase in bank profits, more than making up for the profit downturn during the global crisis.

"They seem to be saying that regardless of how much competition there is, regardless of whether they scrap some fees or not, their profits should be expected to grow at 15 per cent per year in an economy growing at 6 per cent in nominal terms," said Australia Institute executive director Richard Denniss.

"It's like saying they will decide what profits they make and who they will gouge them from."

The statement, from Association chief Steven Munchenberg said that "around three quarters of bank profits each year are paid back into the community," az reference to dividends paid to bank shareholders.

"They are trying to justify the enormous transfer of wealth from their customers to their shareholders by pointing out that their shareholders actually live among us in our communities," said Dr Denniss who will be making a submission to the Senate inquiry.

The Association of Building Societies and Credit Unions welcomed the inquiry saying customers needed to know they could "switch with confidence".

"It is unfair that big banks benefit from entrenched misconceptions that they are somehow safer than banks when all banks, credit unions and building societies are subject to the same strict prudential framework," said chief executive Louise Petschler.

Published in today's SMH and Age

False Banks Making Record Profits Due to Reduced Competition

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