No point making Australian banks uncompetitive, says ANZ's Smith

There are parts of Australia where the housing market is "a little frothy, but it is generally not totally out of whack with where you'd expect it to be," ANZ chief executive Mike Smith said at The Australian and Deutsche Bank Business Leaders Forum in Melbourne on Friday.

Smith said more worrying was the current level of household debt to income, but that was mitigated by broadly high savings rates.  

"Am I too worried? No," he said. "But it is something that needs watching and the RBA is doing that."

He said the market still had underlying strength, as there were parts of Australia with huge amounts of demand and insufficient supply.

Speaking on the issue of bank capital, Smith posed the question:  Could the high level of regulation in many industry sectors be constraining business?

"Is ever-increasing regulation, in all sectors of business, something which is adding value?" he asked.

Smith said that, courtesy of new regulation, on a like-for-like basis, Australian banks now hold almost twice as much capital as they did at the start of the global financial crisis.

"By the end of 2019, when all Basel III capital requirements are in place, that's going to be almost three times," he said.

 "The question is: When is enough enough?"

Smith said the argument surrounding bank capital had got away from the problem it was trying to solve, which was about loss absorbency.

"Banking is a globally competitive business and there is no point making Australian banks globally uncompetitive," he said.

Adapted from ANZ BlueNotes