Reading the weekend’s press, some CBA shareholders are surprisingly sanguine about last week’s shocking revelations. The market capitalisation fell more than $5bn, the theory goes, well in excess of the fine CBA is likely to incur.
Just another case of Mr Market overreacting then?
Maybe. There’s one issue I haven’t seen much discussion of, though, that has the potential to be far more expensive for CBA shareholders.
Australian banks reliant on foreign capital + foreign capital subject to strict anti-terrorism/money laundering rules + CBA scandal = ????
— Gareth Brown (@forager_gareth) August 4, 2017
Every bank that provides funding to CBA has spent the weekend trying to work out what their own compliance obligations are. Are they at risk of providing funding to an organisation without appropriate terrorism financing controls? The US banks in particular are absolutely ruthless on this issue and, given the fines handed out to HSBC and Barclays in recent years, it is hard to imagine how CBA’s cost of funding stays at its current low levels.
Throw in the consequences of a Royal Commission, and the obvious risk of more misconduct issues raising their ugly heads, and a $1bn fine really is the least of CBA’s worries.