ANZ chief suggests IMF focus on Europe
ANZ boss Mike Smith says Australia's banks are not the ones to worry about. Photo: Louise Kennerley
ANZ chief executive Mike Smith has hit back at suggestions by the International Monetary Fund that Australian banks need to be better capitalised, saying the global fund should take a better look at troubled US and European banks.
The Washington-based IMF said last week that Australia's big four banks should be forced to hold more capital because their market dominance and the implicit guarantee of taxpayer support could threaten the economy.
But Mr Smith yesterday was quick to dismiss the fund's findings. ''The IMF probably got a little app, plugs in the numbers and spits out something.'' He suggested the international lender of last resort should take a closer look at banks in other parts of the world.
''If the IMF really wants to do something useful, I think it should start looking at the banks in the US,'' he said, ''perhaps, most importantly the banks in Europe. If we have got a problem, theirs are terminal.''
European and American banks have been hard hit by the global financial crisis and many of them are still repairing their damaged balance sheets. In contrast, Australian banks are some of the best capitalised in the developed countries.
Mr Smith said banks needed to be highly leveraged to provide loans at a reasonable rate.
He warned consumers and businesses could be hit with ''exorbitant'' interest rates if banks were forced to hold more assets like normal business.
Meanwhile, the ANZ boss told a business lunch the boom in Australia's resource exports to Asia had masked weakening fundamentals in Australian economy. He also cautioned the surge in mining investment over recent years was not sustainable.
''Our research highlights up to two-thirds of projects that have been on drawing boards are clearly not going to make it in the foreseeable future,'' he said. ''The cost, completion and relative return risks are simply becoming too great and there is a flight to quality.''
Though Mr Smith welcomed the government's Asian Century white paper, he said there were areas where the country had turned its back on the opportunity in Asia.
He cited the fiasco of the ban on live cattle exports to Indonesia and the government's strict immigration restriction on foreign temporary workers as two examples.
''The treatment of the live cattle trade is a glaring example,'' he said. ''Years of industry development were overturned overnight with exports curtailed and now we wonder why Indonesia wants to be self-sufficient in beef.''
For his part Mr Smith is pursuing an expansion of ANZ into Asia, with the aim of generating nearly a third of the bank's earnings from the region within the next five years.