Recently we have seen the Federal authorities in the US and in Switzerland stepping in to protect customers with the failure of Silicon Valley Bank, First Republic Bank, Signature Bank (all US) and Credit Suisse (Swiss Bank).
Authorities have moved quickly and decisively to avoid further spreading across their systems. This appears to have settled the markets and concerns are softening. Importantly, no customer of these banks has lost any money.
Auswide Bank and the Australian Banking Sector
Firstly, we have no exposure to any of the above-mentioned banks which are all quite different to that of Auswide Bank. We keep things simple, primarily customer deposits and residential mortgages. No exposure to Crypto, Bonds or concentration risk to the tech sector or any other sector except diversified Australian Housing.
Secondly, whilst at times the regulatory environment in Australia can be difficult and costly for a smaller bank, it is nonetheless broad, detailed and vigilant. It plays a very important role in ensuring the strength of the financial system and of course the safety of Australians money. However, the executive and boards of banks remain critical to carefully managing the variety of risks across the banks. They are the first, second and third lines of defence.
Small banks are held to the same standards as the big banks. Unlike the US, we do not have a “regulation light” approach to smaller banks or any banks.
Thirdly, Auswide Bank and other regional banks are very strong, low risk in their lending exposures and their breadth of funding and hold globally high capital levels. Boards and executive are held to the highest standards and have significant responsibility and accountability under the regulatory requirements of the Banking Executive Accountability Regime (BEAR). I’m not aware such a focus exists in the US. We have high levels of regular oversight from APRA including reporting, review and extensive (and growing) standards.
Fourthly, Auswide Bank has an extensive set of risk parameters that would not allow for the operations and ultimate weaknesses that undid the above banks. We are profitable, have diversified funding, a low-risk lending book and frankly are positively boring. We have seen good sustainable profitable growth overtime whilst strongly managing our risks. We have a very high respect for our regulators and spend considerable time at an executive and board level ensuring our compliance. Our executive team are highly experienced in the banking sector and our culture is one where we do not hide any issues we need to manage.
We undertake business continuity testing, stress testing and we have extensive contingency and continuity plans in place.
Finally, and importantly, the Australian Federal Government has an ongoing guarantee under the Financial Claims Scheme that covers Australian deposits up to $250,000 per entity per Authorised Deposit Institution (ADI). This covers all banks, credit unions and building societies. Auswide Bank customer deposits are covered by this guarantee. You can find out more about the Financial Claims Scheme here.
In a nutshell, Auswide Bank and all Australian Banks is/are amongst the safest in the world. This has been demonstrated during numerous crises including no bank failures in Australia during the GFC when again the US and Europe experienced such challenges.
Martin Barrett
Managing Director
Auswide Bank Ltd
