Westpac Banking Corp chairman Lindsay Maxsted has called for a debate on alternative funding for banks, warning of the potential impact of depositors shifting their money away from bank deposits in favour of riskier assets such as equities and real estate, according to The Australian Financial Review.
Mr Maxsted said politicians and central bank officials should engage the banking sector in a debate about alternative strategies, including a corporate bond market, securitisation and equal tax treatment for interest earned from bank deposits compared to shares.
“There is a whole class of people that rushed into bank deposits that go 'I'm happy to rush out of bank deposits and go to equity markets, or property markets',” he said in a speech to the Trans-Tasman Business Circle in Sydney, according to the AFR.
Mr Maxsted warned that the modest credit growth would likely at some point return to pre-global financial levels when it was double-digits compared with about 3.6 per cent currently. A return to robust demand for credit without modified incentives for investors to keep their money in bank deposits could leave banks struggling to keep pace with rising demand for loans, the AFR added.
We don't want the situation where the market is ready to grow and there are these reins holding people back,” Mr Maxsted said, according to the AFR.
Reserve Bank of Australia (RBA) officials and some analysts and bankers have disputed calls by Mr Maxsted and other senior bank executives for reforms to address bank funding issues.