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CBA CEO Ralph Norris warns Rudd government against major banking regulatory reform
COMMONWEALTH Bank of Australia chief executive Ralph Norris has warned the Rudd government the Australian banking system does not need widespread regulatory reform based on the "poor practices" of overseas banks which sparked the global financial crisis. The warning came as the Commonwealth Bank of Australia (CBA) posted a cash net profit of $2.943 billion for the first half, up 54 per cent on the same time last year.
The profit increase, which was slightly above the bank’s previous guidance, was attributed to a decline in bad debt and impairment charges and flat cost growth due to a wage freeze for senior executives.
The bank declared an interim dividend of $1.20, up 6 per cent, which takes CBA’s payout ratio back to 63 per cent -- the same level as before the start of the financial crisis.
Mr Norris told analysts it was vital regulators in Australia did not duplicate the potential widespread regulatory changes that were under consideration for the global banking system.
The CBA also warned that funding costs would remain high in the next year due to longer-term funding remaining expensive and competition in the market for retail deposits.
"There are regulatory discussions covering a number of areas of capital, liquidity and provisioning," Mr Norris said.
"The view has been expressed that there is a need to address a major failure in the global banking system but in reality that failure was only in the US, the UK and parts of continental Europe.
"Outside these markets, the banks have performed reasonably well but the flow-on effects are likely to be felt for some time.
"The cost to banks to access wholesale funding will remain elevated. Australia has largely avoided the impact and the major banks are in a strong financial position."
Mr Norris said the government had to ensure the Australian banks were not "materially disadvantaged" by potential regulatory changes.
The banks are concerned a proposed move to make them hold more capital and liquid assets would drive up their costs.
"We must be careful that Australia, which has a healthy banking system, is not materially disadvantaged by changes driven by the poor practices of banks in the northern hemisphere," Mr Norris said.
"One of the reasons why the Australian economy has performed so well is that the banks have been able to support their customers. I don’t know of any strong economy that does not have a healthy banking system."
Mr Norris, who is also the chairman of the Australian Bankers' Association, said he had told the government and regulators that there was a risk of over-reacting and implementing too much regulation in Australia.
The CBA's chief financial officer David Craig said the bank's move to cut some fees had cost CBA $50million-$60 million in the first half, however, that could double in the second-half.
COMMONWEALTH Bank of Australia chief executive Ralph Norris has warned the Rudd government the Australian banking system does not need widespread regulatory reform based on the "poor practices" of overseas banks which sparked the global financial crisis. The warning came as the Commonwealth Bank of Australia (CBA) posted a cash net profit of $2.943 billion for the first half, up 54 per cent on the same time last year.
The profit increase, which was slightly above the bank’s previous guidance, was attributed to a decline in bad debt and impairment charges and flat cost growth due to a wage freeze for senior executives.
The bank declared an interim dividend of $1.20, up 6 per cent, which takes CBA’s payout ratio back to 63 per cent -- the same level as before the start of the financial crisis.
Mr Norris told analysts it was vital regulators in Australia did not duplicate the potential widespread regulatory changes that were under consideration for the global banking system.
The CBA also warned that funding costs would remain high in the next year due to longer-term funding remaining expensive and competition in the market for retail deposits.
"There are regulatory discussions covering a number of areas of capital, liquidity and provisioning," Mr Norris said.
"The view has been expressed that there is a need to address a major failure in the global banking system but in reality that failure was only in the US, the UK and parts of continental Europe.
"Outside these markets, the banks have performed reasonably well but the flow-on effects are likely to be felt for some time.
"The cost to banks to access wholesale funding will remain elevated. Australia has largely avoided the impact and the major banks are in a strong financial position."
Mr Norris said the government had to ensure the Australian banks were not "materially disadvantaged" by potential regulatory changes.
The banks are concerned a proposed move to make them hold more capital and liquid assets would drive up their costs.
"We must be careful that Australia, which has a healthy banking system, is not materially disadvantaged by changes driven by the poor practices of banks in the northern hemisphere," Mr Norris said.
"One of the reasons why the Australian economy has performed so well is that the banks have been able to support their customers. I don’t know of any strong economy that does not have a healthy banking system."
Mr Norris, who is also the chairman of the Australian Bankers' Association, said he had told the government and regulators that there was a risk of over-reacting and implementing too much regulation in Australia.
The CBA's chief financial officer David Craig said the bank's move to cut some fees had cost CBA $50million-$60 million in the first half, however, that could double in the second-half.
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