Businesses "need finance that looks more like venture capital," but banks probably are not suited to supply it, said Luci Ellis, head of the financial stability department at the Reserve Bank, on Friday.Reflecting on long-standing grizzles over access to finance for smaller and start-up business, Ellis said: "If there is a segment of business finance that is riskier, perhaps much of it should be structured more like equity than debt. "It therefore probably needs to come from another class of investor, not prudentially regulated deposit-taking banks. "In Australia, the superannuation sector more or less equals the banking system in size. Its asset base includes a lot of equity exposures: it is a sector that clearly can take some investment risk. "So some observers naturally wonder if the superannuation sector could be somehow induced to direct its funds in ways that fulfil various social goals and perceived funding needs. "But as the RBA pointed out in its submission to the Financial System Inquiry, the goal of the superannuation system is to provide retirement incomes for its beneficiaries. Superannuation assets should be managed in the best interest of fund members. Their allocation should not be distorted in pursuit of other ends."        Ellis brushed aside suggestions that the post-crisis reform program increased some impediments to debt financing of small business."There is nothing in the Basel III package that makes housing finance relatively more attractive compared with other lending than was already the case in Basel II and before. "Those relativities are designed, however imperfectly, to reflect risk. The exact numbers in those risk weightings have changed over time, but the relativities have not."She also noted that banks in some other countries "actually hold much less capital against mortgages than the big banks here do. "It could perhaps be argued that Australia should go further and be even more conservative in its treatment of housing finance. "That would, of course, make mortgages more expensive and less available than they otherwise would be."
Ellis was speaking at the Economic and Social Outlook Conference hosted by the Melbourne Institute.