MEDIA RELEASE: FSI recommendations on resilience are misguided - The Centre for Independent Studies
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MEDIA RELEASE: FSI recommendations on resilience are misguided

CISlogo-640x360While many recommendations of the Financial Services Inquiry are on the right track, others are ill-advised, says Centre for Independent Studies economist Dr Patrick Carvalho.

It is a good move to propose the extension of the right to choose your own super to all workers; the end of abusive credit card surcharges; and the rebuttal of deposit taxes, Dr Carvalho says.

“However, some of the recommendations regarding the resilience of our financial system are misguided and should not be implemented,” he says.

“There is no consensus on optimal level of capital ratios, and a top-down decision to determine them can do more harm than good. For one, as the FSI Report recognises, “no benchmark of international practice exists for calculating capital ratios”.

“Instead of top-down, fixed-jacket regulations on the right amount of capital levels, Australia’s financial system would benefit more from a humble, bottom-up approach largely reliant on industry input.

“Our banking system has already proved to have sound resilience through the GFC, deemed to be the largest international crisis since 1929. It deserves more credit and a far bigger seat at the table in designing the right recipe for recommended capital levels.

Dr Patrick Carvalho is a Research Fellow at the Centre for Independent Studies