Major banks are separated from the federal government's push to set up a fund for banks to invest equity shares in fast-growing small businesses, with the Australian National Bank and HSBC leading the debt as well as other major lenders less bold .
ANZ and Westpac are the most reluctant to join the proposed Australian Business Development Fund announced by Treasurer Josh Frydenberg on Wednesday, according to sources from the government and the bank.
The Commonwealth Bank of Australia is less advanced than NAB and HSBC to approve the proposal but has signaled to the government that it could eventually join.
The Private Equity Fund is intended to supplement a separate $ 2 billion securitization fund created to buy small and medium-sized (SME) loans from smaller banks and non-bank lenders to improve SME financing.
The proposed bank-financed financing fund, which will hold minority shares in promising SMEs, is unusual because banks typically lend loans to customers, do not invest funds in small businesses.
The fund would require a rare discharge from the supervisory authority of the Australian Supervisory Authority to be financially viable and should avoid violating the corporate collusion laws controlled by the Australian Competition and Consumer Commission.
NAB chief business and private banking officer Anthony Healy, who consulted the government on politics, called on other banks to join.
"We are very supportive and other banks will have to accelerate and commit themselves to the development of the SME sector," said Healy, who visited London to look into a similar fund.
"If a fund is well managed and diversified and you earn the right capital treatment by the regulator, then it is quite reasonable to decide to give some funds to the fund."
NAB is the largest lender of small and medium-sized businesses in the country and believes that there is a shortage in the finance market for companies seeking capital appreciation because retirement funds and other potential shareholders usually do not invest in SMEs. As a result, SME owners can sometimes try to borrow more than they are wise and are often forced to bind their own home as security.
The proposed stock-growth fund is based on models in Britain and Canada, where governments granted capital relief for a special fund funded by large banks that import shares into SME customers.
British Development Fund
HSBC has experience with the UK Development Fund, which has been set up by five major banks and has invested £ 1.6bn ($ 2.8bn) in more than 240 companies.
Steve Hughes, head of HSBC's commercial banking, said: "Fast-growing mid-market companies require funding, and there is often a gap between the level of lending that banks will provide based on factors such as cash flow security, history."
"A business development fund will offer another alternative by providing development funds of $ 2 to $ 25 million to private companies and contributing to economic growth over time."
Some bankers believe banks are better at lending money instead of doing more dangerous equity investments, such as private equity firms.
ANZ, in 2012, closed an internal private equity fund, the ANZ Business Equity Fund, which costs the bank more than $ 100 million.
ANZ's past equity investments in Asia were not particularly successful. Shares proved difficult to loosen and hit the bank's reputation, particularly its 25 percent stake in Malaysia's AmBank, which is involved in a corruption scandal involving the ruined Prime Minister Najib Razak.
Continue to join
David Lindberg, director of the Westpac business bank, said he would continue to bind the government to "better understand the proposed Australian Business Development Fund and remain open to new policy ideas that will help speed up the creation of new businesses."
Westpac has committed $ 150 million to the Reinventure Group for venture capital, the first ventures of the new venture.
A representative of the Commonwealth, Bank of Australia, said: "Small businesses are a critical part of the Australian economy and we welcome the initiatives that support the sector. As a key supporter of small and medium-sized businesses in Australia, we look forward to reviewing the details of the proposal under discussion. "
It is obvious that Mr Frydenberg believes that the fund can still be implemented without including all the major banks.
Following the catastrophic finding of bad behavior in the financial services industry from Hayne's royal commission, banks are willing to direct the government and promote better public relations to press for the government's proposal.