Banking rules have us heading back to the 1970s, says David Murray

An avalanche of “black letter law” is taking Australian finance back 40 years, AMP chair David Murray says.

AMP chairman David Murray. Picture: Gregg Porteous

AMP chairman David Murray has taken a swipe at increased regulation in financial services, including the clampdown on responsible lending, saying it had gone too far and was driving Australia back to the 1970s.

Mr Murray also used a speech in Sydney to urge the superannuation sector to improve its disclosure practices, particularly as its investments in infrastructure and other less liquid assets grew.

The Hayne royal commission last year uncovered that banks had in many cased failed to properly assess a borrower’s ability to repay a loan, and often used crude serviceability benchmarks. The revelations led regulators and banks to refocus on responsible lending obligations, also making it harder for borrowers to secure credit.

Mr Murray said he disagreed with Treasury’s position on responsible lending, saying the royal commission and other factors had created too much “black letter law” and paperwork for even creditworthy borrowers to secure mortgages.

“That does not need 50 pages of black letter law,” he said. “It’s not hard to argue we are going back to the pre-Campbell (report) days by another way.”

The Campbell report, released in 1981, spurred the floating of the Australian dollar and the deregulation of the financial sector. Mr Murray authored the landmark Financial System Inquiry in 2014, which led to a string of reforms including the making domestic banks “unquestionably strong” on capital.

AMP was in the firing line of the royal commission over charging advice fees when services weren’t provided and for repeatedly misleading the regulator. Mr Murray took the reins as chairman mid last year after his predecessor Catherine Brenner resigned due to the scandal.

Mr Murray also used the speech to say he didn’t believe the banking executive accountability regime, or “BEAR”, would improve prudential regulation in Australia.

“The BEAR takes the prudential regulator far too close to the management of banks,” he said.

The BEAR saw the banks submit detailed accountability maps to the Australian Prudential Regulation Authority, the system being designed as a way of bankers being made more directly accountable for their actions.

On superannuation, Mr Murray said superannuation funds should ramp up their disclosure to members on their investments, in a way similar to which listed companies and managed investment schemes provide more information.

“There are issues here,” he said, noting that super funds were venturing more into infrastructure, private equity and direct investments that tended to be illiquid and harder to divest in times of economic downturn.

“Without this transparency, we just don’t know.

“If things get tough enough … the rate of withdrawal (from super) will rise.”

Mr Murray cautioned that if super funds were forced to sell assets quickly in a downturn as investors requested their funds, it would impact the broader finance sector.

“This then sets up a spiral in the banking system.”

He said industry super funds should steer clear of taking activist positions on issues such as wage growth in the economy.

Mr Murray also said that while Australia had enjoyed 27 straight years of economic growth, any “recessionary influences” or shocks would now be more difficult to navigate.

“There is not as much room to move as we had in the global financial crisis,” he said referring to official interest rates being at historic lows and increased levels of government debt.

Separately, AMP told the ASX on Tuesday that non-executive director Geoff Roberts would retire from board at the 2019 annual general meeting on May 2.

The statement cited increasing demands on Mr Roberts’ time from both his executive role at SEEK Limited and as an AMP director.

He joined the board July 2016 and has been chairman of the audit committee since that time and also heads up the AMP’s bank audit committee.

AMP said following Mr Roberts’ retirement, its newest non-executive Andrea Slattery would take over as chairman of the AMP and the bank’s audit committees.

Mr Murray has been overseeing a period of board renewal following explosive revelations which engulfed AMP’s board last year, and claimed the jobs of its prior chairman and chief Craig Meller.