As ANZ seeks to become a 'super-regional' Asian bank, its focus, about which I have expressed concern in the past, will naturally shift away from serving the Australian economy notwithstanding that its deposits, its funding lines, and its day-to-day solvency are currently guaranteed by Australian taxpayers (and the RBA).

Yet most taxpayers presumably have the expectation that in return for providing protection to ANZ given its treasured position as one of the four major parts of the 'core' of the financial system, ANZ would in turn lend out most of its depositors’ savings to Australian businesses and households (and certainly not burn billions of dollars of shareholder equity – which could support orders of magnitude worth of additional lending – on buying businesses in risky foreign jurisdictions in which it has no ostensible expertise). Alas, this appears not to be the case.

The latest APRA mortgage market share data shows that ANZ’s cut of the increase in outstanding balances has fallen from a peak of 29 per cent in October 2008 to just 5 per cent today (see chart below from UBS). This has forced CBA and Westpac to step into the breach. Indeed, ANZ's share of net growth in mortgage balances is less than half of the Westpac-owned St George. So when it comes to Australia’s trillion dollar mortgage market, there are not, in fact, four major banks, but really just two (and recall that we no longer have St George or BankWest, while the regionals are struggling to fund themselves on competitive terms).

This begs a fundamental question: if the Australian banking system’s biggest strength during the GFC was its lack of overseas exposures (as Ian McFarlane and others have repeatedly argued), why then are regulators allowing the major banks to rush offshore to make massive investments in foreign markets that will ultimately expose these same institutions and the Australian taxpayers that (directly and indirectly) subsidise them to a range of complex risks that neither party genuinely understands (or, in the case of taxpayers, should reasonably expect to assume)?

I have enclosed some other charts of interest from UBS below (note the different growth rates in business and residential mortgage lending, which I have highlighted previously).











* Paul Edwards, ANZ's group general manager of corporate communications, has responded to this in Business Spectator's commentary section.