Macquarie Group has estimated the cost of its stringent liquidity policies - which mandate a 12-month period with no access to funding markets - at "hundreds of millions of dollars a year".
Nicholas Moore, managing director of Macquarie Group, said in
an interview with the Australian School of Business that "the test we use at Macquarie is that we have to be able to run our business for a full year assuming the financial markets have closed."
"We assume that we won't be getting any money coming in the door for a year and then we still have to be able to meet all our commitments.
"With the matching of the assets and the liabilities, it means, as our assets free up, we will have the cash then to pay the liabilities down.
"We have a lot of cash on our balance sheet because we have pre-funded our 12-month commitments. It's expensive. It costs us hundreds of millions of dollars a year, but we think it's worth it from the point of view of our shareholders."
The cost of the liquidity policy is equal to several months' profit based on the group's lacklustre returns over the last couple of years.
"It's a cost that we have borne in the past, and the rest of the world, in certain cases, didn't bear that cost, and you can see the consequences of that," Moore said.