Dodgy regulators beg banks to lift criminal mortgages

These guys really are just too much:

Quarterly Statement by the Council of Financial Regulators

As part of its commitment to transparency, the Council of Financial Regulators (the Council) has decided to publish a statement following each of its regular quarterly meetings. This is the first such statement.

The statement will outline the main issues discussed at each meeting. From time to time the Council discusses confidential issues that relate to an individual entity or to policies still in formulation. These issues will only be included in the statement where it is appropriate to do so.

At each meeting, the Council discusses the main sources of systemic risk facing the Australian financial system, as well as regulatory issues and developments relevant to its members. Topics discussed at its meeting on 10 December 2018 included the following:

  • Financing conditions. Members discussed the tightening of credit conditions for households and small businesses. A tightening of lending standards over recent years has been appropriate and has strengthened the resilience of the system. At the same time, members agreed on the importance of lenders continuing to supply credit to the economy while they adjust their lending practices, including in response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Members discussed how an overly cautious approach by some lenders to incorporating relevant laws and standards into loan approval processes may be affecting lending decisions.
  • Members observed that housing credit growth has moderated since mid-2017, with both demand and supply factors playing a role. The demand for credit by investors has slowed noticeably, largely reflecting the change in the dynamics of the housing market. In an environment of tighter lending standards, the decline in average interest rates for owner-occupier and principal and interest loans suggests that there is relatively strong competition for borrowers of low credit risk. Credit to owner-occupiers is continuing to grow at 5 to 6 per cent.
  • Non-ADI lending. The Council undertook its annual review of non-bank financial intermediation. Overall, lending by non-ADIs remains a small share of all lending. However, non-ADI lending for housing has been growing significantly faster than ADI housing lending and there is some evidence that non-ADI lending for property development is also increasing quickly. The Council supported efforts to expand the coverage of data on non-ADI lenders, drawing on new data collection powers recently granted to APRA.=
  • Housing market. Members discussed recent developments in the housing market. Conditions have eased, but this follows a period of considerable strength in the market. Housing prices have been declining in Sydney, Melbourne and Perth, but are stable or rising in most other locations. The easing in the housing market is occurring in a period of favourable economic conditions, with low domestic unemployment and interest rates and a supportive global economy. The Council will continue to closely monitor developments.
  • Prudential measures. APRA briefed the Council on its latest review of the countercyclical capital buffer, the results of which will be published in the new year. It also provided an update on its residential mortgage measures, including the investor lending and interest-only lending benchmarks. In line with APRA’s announcement in April 2018 that it would remove the investor lending benchmark subject to assurances of the strength of lending standards, the benchmark has now been removed for the majority of ADIs. The interest-only lending benchmark, introduced in 2017, has resulted in a reduction in the share of new interest-only lending, along with the share of interest-only lending that occurs at high loan-to-valuation ratios.

Commitment to transparency? So, while we wait for the Hayne RC to recommend new legal precedents to govern lending, which criminal activity would the so-called “regulators” like to see return?

Is it charging dead people:

  • In April the commission revealed the sordid details in which planners from Commonwealth Bank subsidiary Count Financial profited for years from dead customers’ fees.
  • In the worst case revealed, a planner knew a client had died in January 2004, but was still taking almost $1000 a year in fees until December, 2015.
  • By August it was also revealed how National Australia Bank superannuation services whacked fees on the accounts of more than 4000 dead customers.
  • A month later, in September, it was the turn of AMP to be caught out charging life insurance to dead people on their superannuation accounts.

Bullying, stalking and abusing the disabled and infirm:

  • The call revealed a salesman bombarding the young man with information, with the 26-year-old offering hesitant, one word answers. Mr Stewart said his son not understand what was happening.
  • When he pleads: “I need to go”, the salesman pressures him for bank details to set up direct debit.
  • In September the commission heard how aggressive case managers at insurance giant TAL who hounded a nurse with an anxiety disorder for six years — including using a private detective to film her at a swimming pool — went unpunished.
  • Insurance giant TAL hired a private detective to spy on the nurse. Picture: Stock image
  • The commission heard how CommInsure rejected a woman’s claim after she was treated for breast cancer because her surgery wasn’t “radical” enough.
  • In March, the commission heard from a man who told the Commonwealth Bank “I’m a gambler, I’ve got a gambling problem” as he pleaded to escape a credit card debt spiral. Instead he was offered more credit.
  • Youth-focused insurer Youi provided service that was anything but “awesome”, leaving victims of natural disasters displaced from their homes for more than a year.

Rapacious incentives:

  • The commission saw evidence of how Freedom Insurance — the company which pressure sold to a man with Down syndrome — rewarded the best salespeople with Vespa scooters and trips to Bali.
  • But it was revealed funeral insurer Let’s Insure did similar incentives, offering top sales people trips to Las Vegas to stay at a “glitzy hotel”.
  • In yet another case a BankWest manager was awarded a trip to Hayman Island and hailed as a “regional champion” before his dodgy lending practices contributed to a struggling farmer losing his property.
  • In one case, the royal commission blasted Aussie Home Loans for keeping tearful victims of a shonky mortgage broker in the dark about his fraud, all the while continuing to collect trailing commissions on the $70 million of loans he wrote.
  • In one case a victim was kept in the dark even after she called Aussie in tears after being accused by her bank of presenting faked loan documents.

Evil planners and predatory lending:

  • In April we heard of rogue National Australia Bank staff who falsified documents to secure mortgages for customers in return for cash bribes paid across the counter, the banking royal commission has heard.
  • In another case — a high-flying Westpac executive said the bank was too busy to tell the corporate cop about a shonky financial planner, even though it had secretly started paying back the planner’s victims.
  • One of the scariest things in the whole commission were questions over how safe our mortgage market actually is.
  • The commission posed serious questions about the Household Expenditure Measure (HEM) — the benchmark used to assess a customer’s debts and liabilities — which was heavily criticised in the interim report.
  • The commission said lenders did not diligently analyse a customer’s household expenses which could restrict or prohibit their ability to take out a loan.

The CFR really should be more specific about which criminal activity it is in favour of. UBS summarises the RC today to give us some idea:

…the Royal Commission has now released thousands of Exhibits and documents…Although we have not had a chance to review all of these documents in detail we believe the correspondence between the banks and APRA is insightful. In particular, the APRA Prudential Consultation Notes provide the minutes of meetings between senior executives of the banks and APRA.

As an aside, take a moment to consider just how panicked the RBA is behind closed doors to be ramming this extraordinarily dodgy agenda down the CFR’s throat. This is another desperate gambit doubled down on its already crazy bet that it can control a house price bust.

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