November 29, 2013

Parliamentary Enquiry on Bank Stability Urged

A petition to Parliament has asked for a Parliamentary Enquiry into the best way to make banks stable.

Petitioner, Deirdre Kent of the New Economics Party said “If we have got to the stage of planning for customer bailouts of banks to replace taxpayer bailouts, then it is time for Parliament to invest serious time into making banks stable in the first place.’

She said it is becoming clear that central banks are concerned about ongoing financial instability in the face of three growing bubbles of housing, derivatives and commodities and the growing interconnectedness of the global financial system. New Zealand can’t be immune from financial shocks when our four biggest Australian owned banks are all exposed to all these potential shocks.”

She said Open Bank Resolution, which is the system set in place now by the Reserve Bank of New Zealand to come into effect if a bank gets into trouble, was introduced with minimal public input or publicity. “It is time for the public to have its say and add its knowledge to that of the Reserve Bank and Treasury. After all, everyone with a bank account is at risk and the last thing we want is chaos if a bank fails and customers realise they are having their money confiscated.”

She said that banks huge exposure to derivatives of all descriptions now dwarfs their assets. The shadow economy is now at least ten times as big as the global real economy. “Given the seriousness of the situation, and that derivatives were at the heart of the Global Financial Crisis, we want serious Parliamentary resources to be devoted to this issue.”

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