A sharp view against the One Nation bill seeking to prohibit the unlikely and entertain wingnuts has landed from a former key bank adviser, Nicholas Hossack.
A central figure of banking policy debates of the modern era, Hossack was a rare ‘pro’ voice in the tussles over deposit insurance.
With a yen for the merit in deposit insurance systems and fan as far as it goes of the financial claims scheme Kevin Rudd and Wayne Swan raced into play in 2008, Hossack’s Senate submission sideswipes the Senator Malcolm Roberts project.
Nicholas Hossack was Policy Director at the Australian Bankers' Association and is now the principal of Benchmark Analytics, a public policy consultancy based in Sydney.
“The Bill removes the possibility that deposits can be written off or converted to shares in order to recapitalize a failing bank,” Hossack writes.
“This is clearly an additional safeguard to depositors in a failing bank, but it is important to recognise that protecting depositors in this way does not eliminate or solve the problem of large lending losses leading to a bank failure. The failing bank still needs to be managed.
“By prohibiting depositor liabilities to be used for recapitalization, the Bill in effect shifts bank lending risk back onto taxpayers.
“Apart from deposits and other liabilities, taxpayer’s funds are the only other timely and reliable source of fresh capital that can readily be used to keep a failing bank operating,” he says.
In the end, Hossack suggests the very thing the John Adams’ and Wilson Sy’s of this world bleat might in fact happen be made explicit as a distant threat.
“If legal clarity is the goal, then it would be better for market discipline of banks to be clear in the legislation that depositors do face some risk of write off or conversion to shares,” Hossack says.