John Beveridge Herald Sun October 29, 2012
LAST week's collapse of the Banksia Financial Group will give a second wind to the flight of capital into the big banks.
While Banksia offered some deposit-like facilities in the form of debentures, the harsh reality is that these non-bank lenders simply do not have the same prudential backing as banks, credit unions and building societies that are supervised by the Australian Prudential Regulation Authority (APRA), along with most superannuation funds and all insurance companies and friendly societies.
During the Global Financial Crisis there was a rush of funds into APRA-regulated deposit-taking institutions, particularly the big four banks, as depositors grew concerned about the safety of financial institutions after the failure of some large US investment banks.
In a stroke of good fortune, the biggest corporate collapse in Australia - the $5.3 billion failure of HIH Insurance in March 2001 - led APRA to significantly beef up its regulatory standards and as a result Australia's many deposit-taking institutions held up extraordinarily well during a time of intense international financial strain.
There were significant costs - competition from offshore-funded home loan originators dried up and most mortgage funds froze redemptions but the APRA-supervised institutions all performed well.
No doubt APRA's website, which lists all licensed deposit-taking institutions, will once again get a workout this week as worried depositors again check the safety of the institutions where they park their cash.
Hopefully Banksia receivers McGrathNicol will soon have some good news for debenture holders, who should not suffer total losses given that the investments were at least monitored by a trustee.
This week there are once again many annual meetings from companies including Bendigo and Adelaide Bank, Commonwealth Bank, Crown, Flight Centre, Tabcorp Holdings, JB Hi-Fi, IOOF Holdings and Qantas.
Probably the biggest business news for the week will come on Wednesday when National Australia Bank chief executive Cameron Clyne releases its full-year financial results, with most brokers tipping an 8 per cent rise in underlying profit to $5.9 billion.