Mike Hosking: Reserve Bank Governor pushing his angst into our pockets

Reserve Bank Governor Adrian Orr plans to increase bank capital requirements. Photo / Mark Mitchell

COMMENT

Our esteemed Reserve Bank Governor is back from the Jackson Hole chin-wag and has resumed his guns-at-dawn scrap with the banks over the amount of money they have to stash away just in case the world ends.

Maybe at Jackson Hole they told him the world was ending, so he's back with his latest salvo.

Nothing is too big to fail is his new line. Just to get us back up to speed Orr wants the banks to significantly increase the amount of money they keep aside for calamity.

The banks say it's too much, that Orr is too nervous and conservative. The banks say the more you make them keep, then the more expensive banking gets. The higher costs of course are passed on to the punter.

I always like to argue on fact and not theory. And the fact is the best example of trouble we have had of late is the global financial crisis. In 2008, the world started to melt down and a lot of stuff hit the fan. But our banks didn't. They didn't even come close.

Say all you want about banks, but if you're arguing on fact then you must concede in this part of the world they have been - and continue to be - very, very successful. You might ironically argue too much so. Just take a look at the reportage a week or so back on their results.

Financial records are still being broken. The banks are not falling over. Could something we have never seen before happen?

I guess. And that is Orr's argument. But it's no way to live life or run business. The banks, to some degree, have to be allowed to trade on their professionalism and record, and he looks like a sticky-beak nanny who's telling them what's what because he knows best.

And by the way there are things too big to fail. The American car industry was during the GFC.

New Zealand was last time, or indeed Christchurch, so banks and cars and cities are indeed too big to fail. Governments can write cheques that no one else can. I suppose Orr would argue it is not a government's job to protect a bank but then they seem happy to protect our money given the government guarantee on savings.

But here's the over-arching point. There is a very definite and distinctive line to be drawn around being safe and being sensible versus being risky. On the evidence can our banks mount a case that they are good and safe? Yes. Do we want to add needless cost to our lives and businesses? Just on the off chance? No.

In a nutshell Orr is too cautious, too nervous, and too glass-half-empty. He's pushing his angst into our pockets for no good return or real reason.