It would be a political decision to reduce the capital buffers protecting Australia’s banks in order that they can co-lend with super funds.
It’s a compelling idea. Australian super funds are building a $7 trillion mountain of retirement savings by the end of the decade, looking for solid returns, and they already own 40 per cent of Australian equities.
It is supported by the father of super, Paul Keating, who argues that the Australian Prudential Regulation Authority should ease strict capital rules to let banks more easily take part in such club loans.Australia does not yet have a big corporate bond market, though some of the same forces are combining to make it larger in the future. Ageing savers need stable returns at less risk. Rising rates mean better returns on bond investment that have long been absent.
Commonwealth Bank boss Matt Comyn says the rules let governments and bank shareholders sleep at night. The former PM and serial reformer“Unless you push institutions to come to solutions”, banks and super funds will just continue in their traditional roles, he says.
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