The Australian Alert Service is the weekly publication of the Citizens Electoral Council of Australia.
It will keep you updated of strategic events both in Australia, and worldwide, as well as the organising activities of the CEC.
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In this week's Australian Alert Service
5 December 2018
Australian Glass-Steagall would stop bank rip-offs
Australia's best-known finance commentator Alan Kohler
was compelled to recognise the importance of the banking
separation issue, by the sheer numbers of public submissions
to the banking royal commission calling for Glass-Steagall.
Kohler wrote in The Australian on 3 December:
"I have been opening a random sample of the 10,140 submissions—just
short ones from individuals. Without exception
they called for the banks to be broken up and most of
them, surprisingly, used the term 'Glass-Steagall'—suggesting
that the now-repealed American law that used to forcibly
separate banking from insurance and investment banking
be introduced into Australia.
"That would certainly be a fertile field for the royal commissioner
to plough, although most of the banks have already
announced plans to break themselves up along those
lines so perhaps such a recommendation would lack drama.'
Unlike most commentators and politicians, however,
Kohler is not totally fooled by these moves from the banks
that appear as if they are separating voluntarily. Continuing,
he made the following very important point:
"But Westpac says it will keep its insurance and wealth
management division and AMP and Macquarie have not announced
any plans to get rid of their banks, so an Australian
version of Glass-Steagall would make it uniform and would
make sure they didn't slide back into their bad old 'one stop
shop' ways in future.' (Emphasis added.)
The public submissions that got Kohler's attention came
from the Citizens Electoral Council's campaign to flood the
royal commission with calls for Glass-Steagall, to send the
message to Commissioner Hayne that while the banks don't
want separation on the agenda, the public do.
Kohler now joins the ranks of other notable Australian experts
who have endorsed the Glass-Steagall option:
In the aftermath of the global financial crisis, Don Argus,
former CEO of National Australia Bank and former Chairman
of BHP, said in The Australian of 17 September 2011: "People
are lashing out and creating all sorts of regulation, but
the issue is whether they're creating the right regulation….
What has to be done is to separate commercial banking from
i nve s t m e n t
wrote in the 21
will not be
With barriers removed it is possible that banks and the investment
market will move to unlock shareholder value in
structural separation, following the principle of the US Glass-Steagall
Act, which kept commercial and retail banking separate.
Voluntary demergers would threaten the gravy train of
'coupon clipping' for fee extraction, but enforced separation
in Australia seems inevitable….'
Former ACCC chairman Professor Allan Fels was quoted
in The Australian on 9 August: "There are a number of
serious structural issues that need to be considered, the first
and most obvious is the separation of the activity of creating
financial products and then offering so-called independent
advisory services to customers on what are the best products.
A second very important one is whether there should
be a structural separation between traditional banking activities
and the more risky investment activities. … Banks benefit
from the implicit guarantee on their deposit liabilities
which flows into their trading activities.'
Banking expert Martin North of Digital Finance Analytics
stated in his submission to the Interim Report of the royal
commission: "The large players are too big to fail and too
complex to manage, and need to be broken apart. A modern
Glass-Steagall separation would achieve this, and is proven
to reduce risk, and drive better customer outcomes and
right-size our finance sector.'
Former APRA Principal Researcher Dr Wilson Sy recommended
in his submission to the royal commission: "The financial
system should be structurally separated to simplify
regulation, increase competition and innovation, and better
serve the community.'
Banking separation is clearly a major solution to Australia's
banking problems—Australians must demand nothing
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