Rules governing non-banks need to be tightened: Bob Edgar

The former ANZ Banking Group deputy chief executive Bob Edgar has called for tougher laws governing the non-bank lending sector following the collapse of Banksia and Provident Capital.

Edgar said it was “surely no accident” that Banksia chose to include the word “bank” in its name.

“Anything that has the word ‘bank’ in it or uses the word ‘bank’ in a prominent fashion is effectively purporting something about itself,” said Edgar in an interview with the Australian Financial Review.

Edgar says it is the responsibility of prudential regulator APRA to get the laws changed to prevent Banksia using such a name.

Banksia collapsed in October owing 3,000 small investors a combined $650 million while Provident Capital collapsed in July owing investors over $100 million.

Both Banksia and Provident Capital’s debenture funds come with no government guarantees.

ASIC announced on October 31 the setting up of an internal taskforce to look at the failure of Banksia and regulation of the wider Australian unlisted debenture sector.

Edgar, who is now the chairman of Centro Retail Australia after a 25 year career at ANZ, also had a go at federal treasurer Wayne Swan for urging borrowers to seek an alternative to their bank following interest rate decisions.

“The political process has to accept some of the blame that it has encouraged people to believe they are not getting a fair and reasonable risk- adjusted return from the banking sector and they should look elsewhere," he said.

Edgar also called on the major banks to take a “higher profile on corporate matters through leadership and much more engagement with politicians”.