/ 29 March 2023

Sheltered from the financial storm

Australian money

The boss of one of Australia’s major financial regulators has reassured industry leaders that the national banking system “is among the strongest and most resilient in the world”. John Lonsdale, chair of the Australian Prudential Regulation Authority (APRA), says Aussies’ $8.2 trillion in assets are in safe hands with the domestic banking system bolstered by safeguards that go “above and beyond minimum international requirements”. Lonsdale’s reassurance comes as nerves continue to jangle following the collapse in confidence for some US and European banks and as the Reserve Bank board gets ready for its meeting next Tuesday when it will decide whether to roll out an 11th consecutive rate hike.

Let’s go back a step… This month’s banking crisis unfolded after 2 US banks – Silicon Valley Bank and Signature Bank – collapsed, and Switzerland’s Credit Suisse required an emergency buyout. That got many bank customers and investors wondering how safe their financial institution is. But Lonsdale says the safety net developed in the wake of the 2008 global financial crisis, like the government guarantee on deposits of up to $250,000, has upped confidence in our banks. And to pat himself on the back, Lonsdale says regulators, like APRA, are super vigilant in monitoring the banks, insurers and super funds. Expert Michael Lawrence says that since APRA’s formation in 1998, “no Australian has ever lost even one cent of their retail deposit”, which is a fancy way of describing the moolah in your bank account. But others are wary… ANZ boss Shayne Elliot says we should be “a bit more safety-oriented as we enter the coming months”.

Well, investors are considering their options, and as a result of the turmoil, many are (re)turning to cryptocurrency, but the industry is firmly in regulators’ sights. Yesterday, America’s Commodity Futures Trading Commission moved to sue and ban the world’s biggest platform Binance and its CEO/founder Changpeng Zhao over its “illegal” exchange with a “sham” compliance program. The company called the move “unexpected and disappointing”. And overnight, it was unveiled that failed FTX founder Sam Bankman-Fried has been charged for paying bribes “of at least US$40 million” to Chinese officials. He allegedly paid the money to access US$1 billion in frozen crypto assets. FTX was the world’s 3rd largest crypto exchange when it collapsed in November, and Bankman-Fried has previously pleaded not guilty to a range of charges, including conspiracy to commit fraud.

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