Tuesday, 13 September 2016

Basel changes: reforms of banking lending

Property speculators are unlikely to want Basel IV changes, which are likely to be implemented in 2019, according to this article published by Reuters:

http://www.reuters.com/article/us-basel-banks-regulations-idUSKCN11J22O

I personally believe that more capital in banks deposits and lending that reflects risk and opportunity can only be a good thing for an economy.  Given that market conditions suggest lenders have been fuelling speculative lending I expect to see further value wiped off bank stocks in the coming days.

This article make special mention of the CBA but actually suggests that all major Australian lenders are struggling with bad debts.  Do I think that lenders have been fuelling speculative lending?  Yes, I do.  Do I think that a major correction to the tune of a trillion dollars is due on the ASX in the next couple of days?  Yes, I think that's likely.  Do I think we are headed for major economic pain?  Yes, short term pain, long term societal benefit if a down turn is allowed to occur and government make intelligent changes to government spending that encourage the circulation of money and personal responsibility while rewarding effort.

http://www.abc.net.au/news/2016-05-09/commonwealth-bank-third-quarter-trading-update/7395078

Here's what I would consider if I was the government:

  • entirely abolishing SMSF direct property investment
  • no mortgages for property investors
  • mortgages for over sixties for primary properties only and a minimum deposit of 60%
  • abolish reverse mortgages
  • require credit card companies to look at cutting those on government pension and/ or limiting their total credit card line to $5000
  • spend money on public service jobs that provide essential services
  • cut funding to Universities and cap numbers to the top 20% of the population in terms on academic excellence
  • reduce single parent cash payments to bring numbers to more sustainable levels and discourage families from breaking up to increase welfare payments (ensure it is enough for basics)
  •  reduce rent assistance to families who subsidise landlords 
  • build more public housing (provides local skilled jobs)
  • abolish the job networks and instead encourage job seekers to engage with local TAFEs who can run literacy, numeracy, skilled courses and job seeking courses
  • increase funding to TAFEs

Disclaimer: this is my opinion only.  Those seeking professional advice should engage relevant qualified people.

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