Some Current Issues in Banking

As supervisor of the banks, the Reserve Bank has been likened to the shepherd tending his flock. Keeping the flock intact over the past decade, after the regulatory fences came down, has had its moments. A couple have wandered off, and a couple have lost more than their tails. But no carcasses litter the landscape. Indeed, the flock today is looking stronger and healthier than it has for some time, although still requiring careful husbandry. Today I plan to focus on a few topical subjects, namely lending for housing and for small businesses, and the vexed issue of bank interest margins. I do so from a perspective which embraces both prudential supervision and macroeconomic policy. If there is a single theme, it is that while we have quite a lot of competition in our banking system, we could benefit from more – even if, at times, there is the appearance of having too much of a good thing!