There’s no fat cat like an Aussie fat cat. Between them Australia’s big four banks made net profits of A$24bn over their most recent 12-month periods. Take out the big two miners, and that amounts to about two-fifths of the total profits made by the next 1,816 companies on the Australian Stock Exchange.
That stat should play very well among local chapters of the Occupy Wall Street movement, one of which is currently settling into Melbourne’s financial district. But viewed from the vantage point of Apra, the banking industry regulator, there is a lot to be said for protected, utility-like returns. Pre-crisis, Australia’s “four pillars” policy shielded the banks from takeover, discouraging them from doing anything dangerous in pursuit of size or earnings per share. (Gross claims on Europe’s peripherals, plus Spain and Italy, by banks headquartered in Australia, for example, are about one-fiftieth that of UK banks).
Post-crisis, the banks could observe the funding and liquidity problems of peers in the west, and respond accordingly. At ANZ, for example, deposit growth exceeded loan growth by about A$50bn over the past three years, while its A$20bn portfolio of liquid assets is bigger than its total offshore wholesale debt. Apra can, therefore, keep its four AA-rated lenders – now accounting for half of the highest-rated banks in the world – on a very tight leash. It wants banks to meet minimum Basel III rules by 2013, well ahead of the international pack.