The deputy governor of the Reserve Bank of Australia says that global banking scandals ranging from the Libor affair to the JP Morgan trading loss has undermined consumer confidence in the banking industry.
Dr Phillip Lowe says that banks in Australia and around the world need to refrain from complaining about additional regulation and make rebuilding trust the focus of their efforts.
“The banking system globally is not doing enough to rebuild that bond of trust among the public and the problems with Barclays is just another illustration of that. So if the banking system wants the regulatory pressure to ease up a bit and it wants the political pressure to ease up a bit it needs to do more to build its bond of trust,” Dr Lowe told a Australian Centre for Financial Studies Forum.
“Financial intermediation is about trust, banks have done a lot of brand damage and I don’t see much going on at the moment that is effectively rebuilding that bond of trust.”
“Until that exists I think our societies will quite rightly demand that our politicians and our regulators to do something about that. Banks need to more as well rather than just saying ‘regulation isn’t the solution’,” he said.
Australian banks have implemented some of the new Basel regulations which are tough, but have long argued for exemption citing the fact that they withstood the financial crisis unscathed.
Steven Munchenberg, chief executive of the Australian Bankers Association warned there was a risk in “replacing the loss of faith in markets with a blind faith in regulation”.
This article first appeared on Money-AU, the leading portal for comparing Australian financial products