Banking sector policy issues sidelined

A bank chief executive was asked this week whether the federal election campaign had raised any issues that were of concern to him. He said not really, he was watching from the sidelines.

The same goes for everyone else in the banking industry. Two years ago the biggest political decision of the day was how to secure the stability of the financial system and since then plenty has been written about the lessons learned from the financial crisis.

All of that is an irrelevance to our politicians in this campaign.

The dean of the Faculty of Business and Economics at Monash University, Stephen King, wrote in his Core Economics blog after the election was called that an important element in the campaign would be to see how the major parties dealt with three issues: government underwriting of financial institutions; the premium banks should pay for that underwriting; and whether to limit bank activities to avoid moral hazard.

King said the government had no choice but to be an underwriter of financial institutions. The relationship should be made explicit and a risk-based premium should be charged.

King also believes the government should limit the activities of banks and force them to split off some of their activities.