'Extraordinary wave of regulation' concerns Westpac chair

by 16 Dec 2013
Westpac chairman Lindsay Maxstead has cautioned against the “extraordinary wave of regulation” impacting the finance sector in the face of a fresh round of banking regulations.

Speaking at Westpac’s AGM on Friday Maxstead said regulations implemented since the GFC are “already adding cost and complexity to our system”.

"It is important to fully assess these changes and their appropriateness to our markets.

"It is similarly important that these developments, along with their implementation timetables, do not carry with them unintended consequences or place our system at a comparative disadvantage to [that of our] international peers."

The comments come before APRA's expected publication this week of details of a capital charge to be levied against the banks for the risk they present to the broader economy and which could see them forced to hold an extra $14 billion in capital.

The charge is expected to be introduced from 2016, and could impact bank’s ability to increase dividend payments and force them to conduct more share buybacks.

Maxstead boasted in his speech of higher dividends, two special dividends and a further significant uplift in the share price for Westpac in the last financial year.

A looming December 21 deadline may also put further pressure on banks if enforced by the US Commodity Futures Trading Commission, requiring Australian banks to comply with US regulations covering the trading and clearing of over-the-counter derivatives used by the banks to hedge their loan books.

If Australian banks are cleared to deal in the market using Australian regulation instead it is estimated they will save approximately $60m in annual costs.

Maxstead also announced a “strong earnings and growth” in the past financial year, including a 14% profit increase.

“The result was particularly pleasing given that it was achieved against a softening of the economic environment in Australia and generally modest demand for lending,” said Maxstead.

"More interest is beginning to emerge from businesses as they think about investing again. This interest has yet to translate into real activity and new lending, but is a welcome sign.

"As a result, we expect a modest pick-up in lending growth throughout this year."