Standard and Poors has downgraded many Australian Financial institutions citing weakness in the Australian real estate market and a potential for a sharp correction. The downgrade excluded Australia’s five “too big to fail” banks:
- Commonwealth Bank of Australia
- Australia and New Zealand Bank
- National Australia Bank
- Westpac Corporation
- Macquarie Bank
The reason that these five banks are excluded is that they inherit the Australian Government’s AAA credit rating. These banks are “too big to fail”.
In recent times, Australia’s major banks have been noted for poor behavior. These banks have no need to behave well because due to the Australian government guarantee. The incentives in the finance industry need to be realigned such that accountability lies with those who choose to take the risk.
It is not widely known how exposed the “too big to fail” Australian banks are exposed to the global derivatives markets. The Australian Prime Minister, Malcolm Turnbull, is a former investment banker with Macquarie Bank, one of the "too big to fail" banks. I must question whether his loyalties are to the Australian people or to his “mates” in the finance industry.
As an Australian taxpayer, I object to being at risk because Australian banks want to play in the global financial casino. It is a classic “heads you lose, tails they win” situation!
Plucky
23 May 2017
And we end up in the same predicament as Ireland, owning the bad debt. Having said that, Ireland has recovered markedly after implementing huge corporate tax cuts, which caused a huge investment boom. Government austerity also helped.
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