Bank operations and exposure needs addressing NOW!
Why would a government chartered by the constitution to protect the people be so reluctant for a Royal Commission into Australian banking when overwhelming public evidence suggests a pungent smell of endemic criminal corruption is abundant, reflecting a vested political interest.
You may find the attached paper of interest.
We thank Betty Luks of Australian League of Rights for presenting this paper to sosnews for our readers to review. The International Review of Financial Analysis published by Elsevier Inc was invited to present a submission to the Iceland government in the aftermath of the banking collapses in 2008.
The big four taxpayer protected banks have developed their unchallenged rule book void of all serious accountability and shrouded in government protection that now rides on shaky ground.
There is escalating support in the upper house to investigate banks with extremely wide terms of reference reporting back to the parliament, not the Executive. This does not apply to a Royal Commission which is implemented by the Cabinet which can appoint allied commissioners and terms of reference, which is then reviewed from behind closed doors of the executive alleviating any input from the people’s parliament.
Harry Palmer, Editor
International Review of Financial Analysis Introduction
Thanks to the recent banking crises interest has grown in banks and how they operate.
In the past, the empirical and institutional market micro-structure of the operation of banks had not been a primary focus for investigations by researchers, which is why they are not well covered in the literature.
One neglected detail is the banks’ function as the creators and allocators of about 97% of the money supply (Werner, 1997, 2005), which has recently attracted attention (Bank of England, 2014a,b; Werner, 2014b,c).
It is the purpose of this paper International Review of Financial Analysis published by Elsevier Inc to investigate precisely how banks create money, and why or whether companies cannot do the same.
Since the implementation of banking operations takes place within a corporate accounting framework, this paper is based upon a comparative accounting analysis perspective. By breaking the accounting treatment of lending into two steps, the difference in the accounting operation by bank and non-bank corporations can be isolated.
As a result, it can be established precisely why banks are different and what it is that makes them different: They are exempted from the Client Money Rules and thus, unlike other firms, do not have to segregate client money. This enables banks to classify their accounts payable liabilities arising from bank loan contracts as a different type of liability called ‘customer deposits’.
The finding is important for many reasons, including for modelling the banking sector accurately in economic models, bank regulation and also for monetary reform proposals that aim at taking away the privilege of money creation from banks.
The paper thus adds to the growing literature on the institutional details and market micro-structure of our financial and monetary system, and in particular offers a new contribution to the literature on ‘what makes banks different’, from an accounting and regulatory perspective, solving the puzzle of why banks combine lending and deposit-taking operations under one roof.
Click on picture to download/read the document