The end of cheap money: says CBA’s Norris

COMMONWEALTH Bank chief executive Ralph Norris expects Greece’s debt woes will affect the pricing and availability of wholesale funding for Australian banks.

But he said CBA would not be hit this year because it was already well funded.

The situation in Europe looks to be deteriorating with credit downgrades of Greece and Portugal adding to fears that the region’s debt problems could threaten the global economic recovery.

“Obviously, volatility in markets is something that has happened on a regular basis over the last two to three years, and this is another incident,” Mr Norris said.

“So certainly it will have a potential impact on pricing and availability in the short term, but we don’t see it impacting us at this point.”

He said CBA did not have any direct exposure to Greece or its banks.

The head of Australia’s biggest retail bank believes the cost of wholesale funding will increase over the next year as long-term debt continues to roll over.

“So the days of paying 13 to 15 basis points over the swap rate to borrow funds internationally are gone,” Mr Norris said.

“I don’t think we are going to get back to those levels any time soon.”

On the retail side, deposits were still growing at a reasonable rate and he viewed pricing as still “quite competitive”.

Speaking at an American Chamber of Commerce in Australia luncheon in Sydney yesterday, Mr Norris said while the major banks had come through the global crisis in a strong financial position, regulatory reform for the global banking system represented a risk.

“While I accept that there is need for regulatory reform, we must be careful that Australia, which has a healthy banking system and an effective and well-managed regulatory regime, is not materially disadvantaged by changes driven by poor practices in the northern hemisphere,” he said.

Mr Norris said he was confident the Australian government and regulators also recognised that risk.

“But I must hasten to add there is still a real risk of such an outcome if the G20 goes down what looks more like a punishment route in the US and the UK, rather than a route of protecting the system,” he said.