In its submission to the Financial System Inquiry, the AFMA submission noted that government bonds make up a majority of Australia’s debt market, followed by banks and other financial institutions, while corporate bond issues are clearly lagging.
Speaking to InvestorDaily, AFMA chief executive David Lynch said one aspect of having a more vibrant domestic market is that it increases choices for companies raising funds and provides increased competition for the industry as a whole.
“Particularly when you are looking at economic growth and the potential for banks not to be able to fund growth the way they did in the past under the new Basel III capital liquidity arrangements, that suggests there is potential for the market to play a greater role,” Mr Lynch said.
“You hear regulators internationally – and also people in the industry – talking about a move towards a more market-based financing,” he said.
While the corporate bond market has been developing and there are more options available, the question is really how to further develop the market and bring it to a new level, Mr Lynch said.
“There have been a number of initiatives to help develop the market, but they haven’t brought the market to a level where people think it is reaching its potential by any means,” he said.
Mr Lynch added that while there is already a fairly sizeable market for bonds in financial institutions, there is scope for it to develop further.
