Would a common ownership remedy cause liquidity issues?

If the government found a common ownership issue and remedied it with restrictions on ownership across funds it could cause liquidity issues, according to the Commonwealth Bank of Australia (CBA).

CBA chief executive, Matt Comyn, said during a parliamentary hearing he had not seen any evidence that suggested there were practices that needed to be questioned.

Comyn said an explanation of why there were similar questions asked by different investors for large firms was to satisfy their own models and their valuation rather than an indication of any inappropriate.

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“My other question is—it's definitely worth examining—what would be the remedy? One remedy that would be particularly concerning in a banking sector, which I'm not suggesting is necessarily where the committee is going, would be any restrictions on ownership across funds,” he said.

“One of the things you absolutely need in a banking system is access to capital, particularly in difficult situations. One of the real strengths of the industry and the superannuation system in Australia is there is deep capital here to help Australian companies should that be required under times of economic stress.”

Comyn noted that boundaries around competitors were being redrawn.

“For Woolworths, is their biggest competitor over the long-term Coles or is it Amazon? Do we spend most of our time worrying about the three other major banks or are we thinking of some of the big tech companies—which, across Amazon, Facebook, Google—have a last month's revenue of $1.6 trillion, which is broadly three times the federal government's receipts? They're very interesting questions. There are potentially other concentration issues,” he said.

 




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