Posted September 29, 2018 05:29:42 The Federal Government is set to impose tough new measures to tackle Australia’s banking system, with the Federal Government set to introduce new regulations aimed at restricting bank profits and forcing lenders to put in place a higher percentage of collateral in case of bank failure.
Key points: New legislation is expected to see banks face tougher restrictions on profits and collateral in the coming months Banking reform is likely to be key to avoiding another banking crisis in Australia.
Key points: Federal Finance Minister Scott Morrison has promised to increase the proportion of collateral banks must put into their businesses to help them withstand a crisis.
Mr Morrison said the new measures were intended to “save Australia from a repeat of the Great Recession”.
The Government is expected, in the first major changes to the financial services industry in 20 years, to impose restrictions on bank profits in a move that is likely see bank profits rise as banks take more out in profit and increase their collateral requirements.
It is expected that, once the Government passes the legislation, banks will be required to put into place a percentage of the collateral in their businesses that can be used for insurance and to cover loss of income or assets.
“The Government will introduce the measures to address the risks that have been raised by the recent financial crisis, and protect Australians from another financial crisis,” the Finance Minister said in a statement.
“These measures will require banks to hold more than 30 per cent of their assets in their business, and a higher proportion of the capital in their bank.”
Bank profits are likely to fall as banks have less to lend and fewer assets to lend, as well as more to borrow.
Mr Turnbull said the Government would also introduce a higher level of collateral requirements for lenders and to “set the new benchmark for the level of investment required in the Australian banking system”.
“It’s going to be a tough bill, it’s going.
But it’s a tough law,” he said.”
We’re putting the country on notice that we will not tolerate a repeat and we will continue to work to achieve a return to the stability of the financial system.”
Banks in Australia will have to set up more collateral requirements, including for insurance purposes, and reduce the amount of collateral they hold.
The Bank of Australia is one of the banks which could be forced to reduce the proportion in their banking operations to save the Australian economy.
The Government’s plans are set to come into effect on October 31, with banks set to have to comply by January 1, 2019.
The banks will also have to reduce their capital requirements to a percentage that is lower than they were before the crisis, as a result of a government move to reduce capital requirements from the $1.2 trillion benchmark to $1 billion.
The measures come in response to concerns about banks’ profitability.
The new measures will have the most impact on the major banks, which have been in the red for the past six quarters.
The big banks have been hit hard by the financial crisis and have been forced to lay off tens of thousands of employees.
The Government said it would cut their capital ratios to 50 per cent, with a 20 per cent cap on how much capital a bank can hold.
Mr Abbott has also promised to raise capital requirements for the major Australian banks by at least a further 10 per cent over the next four years.
“Our plan will also include a further reduction in capital requirements over the coming years,” Mr Abbott said in the statement.