Oct 29, 2013

At 30% of ASX value, Australia’s banks are truly too big to fail

Australia's banks now occupy a dominant role in our economy -- and are thus the dominant risk. Unlike anywhere else in the world, they now really are too big to fail.

Glenn Dyer — <em>Crikey</em> business and media commentator

Glenn Dyer

Crikey business and media commentator


You know the biggest threat to the Australian economy? It’s not the debt ceiling or the level of debt, or the recapitalisation of the Reserve Bank, or even the high value of the dollar.

For Treasurer Joe Hockey, the real policy headache might the creeping takeover of the economy by the big four banks. In fact, the Australian economy is now hostage to the fortunes of the big banks, something beyond the control of the federal government.

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6 thoughts on “At 30% of ASX value, Australia’s banks are truly too big to fail

  1. stephen Matthews

    The point about the Treasurer being a passenger is well made.
    It would be so easy for a government owned bank to get a slice of that $27bn in annual profits .
    I put the idea to Anthony Albanese last month …when he was in there campaigning for the leadership of the ALP.

    But he did not respond .
    This too big to fail phenomenon .Its a global political failure..but that does not excuse our own pollies.

  2. Observation

    It will be interesting to see if Joe starts the bank bashing like he did in opposition at every opportunity?

  3. Gavin Moodie

    Is banks’ share of the local stockmarket the same as their share of the economy? If the big 4 banks nonetheless are an economic risk, there seem to be 2 options. The Australian Government could force fragmentation of the banks and then limit each to a maximum share of the market. Or the Government could increase regulation and monitoring to reduce the risk. The second option currently seems more likely.

  4. Altakoi

    Isnt the dominance of the finance sector over the ‘real’ economy pretty much what preceded the banking collapse everywhere else? The banks have indebted the nation to the extent that they now vaccume up vast amounts of income. But they don’t actually want to own anything they have as collateral on their books. Their profits would dissappear overnight if they had to reposses, maintain, sell or rent all the real estate they claim to have anchoring their books. So its a game of chicken in which they try to own the profits of the economy, without getting trapped into owning any actual assets. Thats not a take over of the economy, its parasitism on the economy.

  5. malleebull

    Does anyone understand fractional reserve lending? I understand it means that if a depositor puts 10K in the bank ,then said bank is allowed to lend 70K out to others, plus interest. What a gig!, What a business model!!-any other business doing this would be deemed illegal- so how can currency not be inflationary and how can the banks, in time, not subsume the rest of the economic landscape- it’s mathematical certainty and its a serious concern

  6. stephen Matthews

    yeah If The Treasurer had put that $9bn of capital into his own govt owned Federal Bank of Australia ( instead of punting with the RBA) he could have got into some of that fractional banking action ….and made everyone but the big 4 bankas shareholders happy.

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