Regulation from top 'threatens' banks

Group of 20 regulators pose the greatest threat to Australia's banking system as they clamp down on the financial industry, according to David Morgan, chairman of private equity firm JC Flowers' Australian unit.

"Measures are being devised up the line in the hands of a few who don't fully appreciate the technicalities, the costs, potentially serious ones, and the unintended consequences," he said.

Morgan, former chief executive of Westpac, said yesterday: "The greatest threat is from heavy handed, hastily devised G20 re-regulation."

Regulators worldwide are seeking tighter controls after the global crisis sparked more than US$1.6 trillion ($2.16 trillion) of losses at financial companies.

G20 governments last week discussed how to curb excessive risk-taking.

In Australia, banks face tougher rules on what count as liquid assets for stress testing, the Australian Prudential Regulation Authority outlined in September.

The nation's financial system remained resilient throughout the crisis and in aggregate, banks experienced only a modest profitability decline, the Reserve Bank of Australia said in a review in September.

No Australian bank required a government bailout during the crisis. In the US, financial companies received US$407.2 billion.

"The existing financial regulatory system, certainly in Australia, has served us well, and we should fight hard not to be saddled with these looming G20 reforms," said Morgan.

- BLOOMBERG