SYDNEY (Reuters) - Banks around the world should be obliged to follow a “bail-in” regime if it were to be implemented, and not just those “too big to fail”, Michael Smith, chief executive of Australia and New Zealand Banking Group, said on Wednesday.
On Tuesday, a government-backed interim review said Australia’s main lenders were viewed as too big to fail and it was considering policy options to reduce that perception, including ringfencing critical banking activities, bail-in and boosting capital requirements.
“If you have a bail-in of the globally systematically financial institutions you then have to have a bail-in throughout the industry,” Smith told reporters ahead of a meeting of the Business 20 group in Sydney.
The B20 was set up in 2010 to give policy recommendations on behalf of the international business community to the Group of 20 bloc of advanced and developing countries.
Europe is already pushing ahead with plans for a “bail-in” regime to force bondholders and depositors, rather than taxpayers, to bear the cost of failed banks and the approach could become a blueprint for future rescues.
The rules aim to save money for taxpayers, but will impose higher costs on the banks.
Using a “bail-in” rescue model, bondholders will have to swap their debt for new bonds and equity in the bank.
Smith also said corporates needed to invest in economic growth, since there was no dearth of funds.
“There is a huge amount of liquidity but that liquidity hasn’t found its way into the real economy,” he said. “That has led to lower growth ... and the recovery has been slower than anticipated.”
Business confidence in Australia has yet to improve, said Smith, who was talking in his capacity as a spokesman for a B20 taskforce on financing growth.
“It is very much a business confidence issue,” he said. “It is beginning to return in the United States ... I think there’s some way to go in Australia.”
Reporting by Swati Pandey; Editing by Jane Wardell and Clarence Fernandez