Banks not sold on ARDB

13 Feb, 2014 03:00 AM
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Rural Finance Round Table Working Group chairman Rowell Walton.
There is a lack of specific detail about how the ARDB would take over debt management
Rural Finance Round Table Working Group chairman Rowell Walton.

DEBT-stressed farmers are pinning their hopes on proposals for the Reserve Bank of Australia (RBA) to offer a low interest alternative to the nation's deep-seated rural loan problems.

The banking industry, however, is not convinced the idea of the Australian Reconstruction and Development Board (ARDB) is a realistic answer to dealing with problem debts which banks and their borrowers are struggling to get on top of.

The ARDB has been proposed by Senators Nick Xenophon and John Madigan as a body that would buy bad debts from rural lenders and manage rural adjustment programs.

It would also have a longer-term role to research and help build a fiscal environment for the farm sector in preparation for crisis events like drought.

"There is a lack of specific detail about how the ARDB would take over debt management, but there's an assumption that banks would sell off their loans at a discount," said Australian Bankers Association policy director, Stephen Carroll.

"We don't feel something like this is warranted to address the issues," he said.

Mr Carroll noted federal governments already had the Rural Adjustment Act to provide low interest loans or grants to help financially crippled producers.

He said banks would also be reluctant to have their sector being "made less viable" by government-subsidised cheap debt product for farmers administered by a new service which itself would be expensive to run and regulate.

But Rural Finance Round Table Working Group chairman Rowell Walton said the subsidiary of the RBA would not cost the government or taxpayers anything and would be delivering a solution to a local problem, just as central banks did overseas.

"In the US the Federal Reserve's monetary stimulus policies inject assistance into industry and financial markets; in Brazil the central bank gives low interest funds to help companies like JBS; the Japanese central bank is supporting industry and economic spending, and the European central bank has propped up banks all over Europe," he said.

"We don't need to ask the government to spend anything - providing a short-term circuit breaker for people caught out by high commercial interest rates can be a normal method of banking activity for our central bank," Mr Walton said.

He envisaged the ARDB would fund a range of rural development and reconstruction propositions in addition to giving farmers a five-year low-cost funding window to re-establish their viability without the weight of current rates and penalties costing them up 16 per cent.

FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
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READER COMMENTS

Bushfire Blonde
13/02/2014 7:48:58 AM

Oh no, the Big Four would not like the idea of a ARDB. They may not be able to continue to pay their senior management obscene amounts of money, pander to the monied men with high dividend payments and still make record profits. Oh no, they would not like the idea of a ARDB. Mr Hockey wants everybody to be responsible for their actions so he had better withdraw the Government guarantee of Bank Deposits so that the Banks no longer enjoy this protection and learn to stand on their own two feet - be responsible for their actions in operating their businesses.
looking after home
13/02/2014 8:10:28 AM

The State and Federal Governments give hand outs to foreign interests as an incentive to buy our assets, and tax concessions far below those of local producers, as long as the loans only go to Australian owned farms so they can sell to Australian owned buyers then Australian benefits otherwise Nature & poor policies screw farmers.
Geoff
13/02/2014 8:33:57 AM

What the banks are really saying is "don't take our profits away", because they have no compunctions about bleeding the last drops of profit out of people, then selling the assets off when they have to foreclose. Perhaps that's too cynical? ha!
dogsbody
13/02/2014 9:26:22 AM

Of course the banks wouldn't be interested, it could impact on profits. ANZ just barely scraped through with a 13% return on investments. Shareholders in most banks get a 5% plus fully franked dividend plus capital gains which have been very substantial in the last decade. how dare we even consider that by protecting food security they might end up 0.25% worse off. Silly us! The feds won't risk the ire of their largest voter base and source of corporate funds to assist their re-election prospects to prop up the most important industry for Australias future. they seem to completely lack ideas.
Meg
13/02/2014 10:54:39 AM

Oh dear! Can't upset the banks then, can we...with their billions in profit, they naturally don't want their cash cow to dry up a bit! The banks are bleeding farmers to death...literally! Rid the country of most of the foreign banks and keep the farmers...you'd see the quality of ALL Our lives change dramatically! For every $1 that farmers have at their disposal, the community benefits by turning it over 20 times...for every $1 the greedy banks get their hands on, their CEOs raise their salary packages and it benefits NO ONE ELSE! He'll tuck it away with the rest of his /her ill gotten gains!
intheknow
13/02/2014 4:57:12 PM

are the banks worried about being shown up for some of their terrible behaviour towards farmers who have suffered a loss because of a natural disaster - those things they call margins that they add to our interest charges. Banks have been ripping farmers off for years and should be shown up for their actions!!
Bob
13/02/2014 6:07:40 PM

The banks want to be repaid the money that they lent people, and to be repaid under the terms of the agreement that the person singed. Yet this seems unreasonable? For your peoples sake I hope that the "entitlement" cash cow never runs out, you would find the real world a very scary place indeed!
john from tamworth
13/02/2014 6:56:43 PM

I really liked the part where Walton said it wouldn't cost the taxpayer/government anything.What a ripping yarn but only if you believe money grows on trees.Any "bank" dreamed up by these two populist senators will prove to be toxic to the taxpayer.Walton may be surprised to learn that the RBA is legally independent (thanks to Costello) and will not go along with the money printing scam which is all the rage in fiscal basket cases like the US and Japan.The RBA will quite rightly insist that any such bank be fully funded by the government.Try selling that one to the taxpayer.
Bushie Bill
14/02/2014 8:00:20 AM

The concept of an ARDB is just another self-deceiving head-in the-sand pea-and-thimble side-show con, and should be seen for what it is; a blatant outrageous demand for a handout without the honesty of an admission that it is simply a demand for a handout. The SA Senator should read the history of the disaster of the State Bank of South Australia, which cost his state billions. There is nothing like simplistic short-term populism, is there? To hell with who gets to pay the bill, as long is it isn't the beneficiaries of the taxpayers' largesse, eh? Agsocs are imaginative if nothing else.
jim
14/02/2014 9:10:19 AM

fractional reserve banking is creating money-debt-out of nothing,,,,,charging interest(usury)on money(debt)created out of nothing is what makes HUGE profits for bankers,,,,debt=slavery
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