Here's my summary of the key issues that affect New Zealand over the weekend with news of the big Australian banking inquiry.
In Sydney yesterday, David Murray's Financial System Inquiry has made public its recommendations - opposed by the major banks - to lift their funding requirements.
The inquiry made two key proposals that may raise costs for the major banks by billions - potentially hitting profit margins and dividends - but also assist smaller banks to compete.
They concluded that Australia's major banks sit only middle of the road by international standards in the amount of capital they hold to cover potential loan losses. More than AU$28 bln may be needed to meet a safer standard. In reaching this finding, the FSI has expressly rejected research commissioned by the Australian Bankers' Association that put Australia's banks in the top quarter of institutions globally.
If the Australian Government acts of these recommendations there could well be implications for New Zealand. And the RBNZ will need to acknowledge - like their Ocker counterparts - that leverage at New Zealand banks is just too high to be safe in a crisis.
In the US, their economy added 321,000 jobs in November, while the unemployment and participation rates were unchanged. The number of jobs created was well above analysts' forecasts of about 225,000. The numbers for October were revised higher. US employers have now added at least 200,000 jobs for 10 months in a row, the longest period of jobs growth in twenty years.
Meanwhile, the US trade deficit narrowed in October with exports, especially to China, rising faster than anticipated. This came despite a stronger US dollar.
Back in New York, UST 10yr bond yields rose at the end of trading last week and are now up to 2.31%.
The oil price starts the week low but pretty much unchanged from Friday. It is now US$66/barrel and the Brent price is US$69/barrel. Big oil is starting to take an ax to its internal costs, but most others see gains in the lower pump prices.
Gold is lower at US$1,190/oz.
The kiwi dollar fell against the US dollar on the strong US jobs numbers but we held our own against most others. We start the week at 77 USc which is a whole 1 USc down from this time on Friday, 92.8 AUc, and the TWI is at 78.1.
If you want to catch up with all the changes on Friday we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
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3 Comments
NZMEA calls for interest rate cuts
www.stuff.co.nz. Business
Cut & paste into this site is a bit temperamental .....
any plans for a Mobile version of Interest?
Banks funding requirements.
It seems to me the Aussie Banks make the extortionate profits they do in New Zealand because they have excessive market control. But that makes them subject in my view to extra supervisory requirements. i.e. they cannot arge a right to make profits, without delivering national security.
Also with their size they have effectively made themselves into public utilities, and could deliver vast downside for our nation. Accordingly, they should be required to hold huge capital reserves,
The power of the lobbyists
Footnote to the Murray Financial System Inquiry (FSI) - Michael West
Governments of both hues are proving increasingly weak in the face of lobby groups – even pathologically incapable of standing up for public interest in the face of powerful vested interests. And Australia's banking lobby is the richest and most powerful of them all
http://www.smh.com.au/business/banking-and-finance/rattled-banks-up-the…
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