By Lucy Battersby
COMMONWEALTH Bank chief Ralph Norris has played down profits in the banking sector and cautioned politicians against punishing or taking revenge on banks through regulation.
He said that while picking on the banks was an easy way for politicians to get on the front page, as banks were a ''slow-moving target'', new regulation could damage competition in the sector by making it harder for new entrants to get a foothold.
Mr Norris also defended his position as the highest-paid banking chief executive - with a $3.1 million take-home salary and potential $13 million bonus - given that his bank was the first to be accused of taking advantage of mortgage holders by lifting rates beyond the Reserve Bank's cash-rate increase.
''I do not determine my pay package,'' he said after a business luncheon in Melbourne yesterday. ''I have certain performance hurdles that are put in place. My package has been voted on by shareholders for the last four or five years and in every instance the shareholders have approved my remuneration by over 90 per cent so I don't have anything further to add.
''The decision is made by our board and is endorsed by shareholders.''
Denying that banks were gouging, Mr Norris said: ''Australian banks are a little unique in some respects in the fact they do have a broad range of businesses that they operate - obviously banking, life insurance, funds management, retail sharebroking, general insurance. And those business augment the banking income.
''If you strip out the income that comes from those particular sectors of our services, in our case we make about 75 basis points after tax on the assets that we have employed in our business.''
Banks' return on equity fell to about halfway on the list of the top 100 listed companies in Australia, he said.
''Yes the numbers are large, but the businesses are large. The returns in the banking industry are not much more than half than what they are in the mining industry or in some sectors of the retail industry.''
In a speech on the recent financial crisis, Mr Norris said supervisors in the US and Britain had been ''asleep at the wheel'', and praised the quality of staff in the Australian Prudential Regulation Authority and Reserve Bank.
On Monday, the Reserve Bank released minutes of its latest board meeting that noted banks' long-term funding costs had increased significantly since the crisis.
But while he praised Australia's regulators, he was less flattering about politicians, saying European politicians had implemented populist social policies at the expense of long-term economic stability.
''I think that regulators and politicians have to be careful of the sort of policy prescriptions they put in place because there is always the law of unintended consequences. And I think there is a real possibility that we will see unintended consequences flow from decisions that are made in haste, and decisions that are made for populist reasons and decisions that are made on the basis of revenge [and] punishment,'' he said.
Treasurer Wayne Swan has said the federal government will announce measures soon to strengthen competition in banking by giving the competition watchdog more power and introducing ''reforms to keep the big banks honest''.