Australian banks

MacroBusiness covers Australian banks from the perspective of their macro-economic role, as political economy actors, as investment propositions and in terms of financial stability and capital adequacy. Australian banks have played a crucial role in inflating the Australian property bubble, exist within an utterly privileged position as “too big to fail” institutions and operate within a deeply distorted financial architecture that has Australian tax payers well and truly on the hook in the event of trouble. MacroBusiness seeks to define this role for investors as well as change it in the name of the Australian national interest.

5

Wasted billions gush through Frydenberg’s LIT loophole

Via John Kehoe who is doing a great job on this: A commission loophole for stockbrokers and financial advisers opened up by the Coalition government contributed to investors losing out on $1.6 billion in sharemarket returns last year, according to new analysis. The revelation comes as a separate survey by Morningstar’s Firstlinks showed that only

0

UBS: CBA result squeezed by NIM

Jonathon Mott at UBS: (1) Cash NPAT from continuing operations $4,477m (Cons $4,382m); (2) Cash Basic EPS continuing 253cps (Cons 248cps); (3) Interim dividend held flat at 200cps. (1) Net interest income +3% to $9,293m (2% above Cons); (2) This was driven by a strong NIM +1bp to 2.11% (Cons 2.08%) given the timing benefit

7

RBA/APRA separation is failing

In 1998, following the release of the Financial System (‘Wallis’) Inquiry’s final recommendations on financial system regulation, the Australian Government implemented a new organisational framework for the regulation of the financial system. Prior to the Wallis Inquiry, regulation was either governed by the states for some products or based on a sectoral approach with industry

1

Labor moves to plug LIT loophole

While Recessionberg fiddles. From Chirs Joye: Wow! Labor will push a legislative amendment in Parliament to shut down a loophole that allows fund managers to pay commissions to stockbrokers and financial advisers for selling newly-floated listed investment funds. Shadow cabinet has agreed to the plan by Labor’s financial services spokesman Stephen Jones, who is ramping

1

What the AMP bucket shop says about LIT commissions

Via the AFR: AMP failed to show the “corporate will” to stop former financial planner Rommel Panganiban from churning 49 clients into new AMP insurance policies and pocketing hefty commissions, the Federal Court ruled on Wednesday. The embattled wealth giant’s failings amounted to six breaches of the Corporations Act worth, by Justice Michael Lee’s determination,

2

LIT desperados attack Joye

Chris Joye at Livewire: I guess it is not surprising, because I have been repeatedly threatened by vested interests in the LIC/LIT debate with personal attacks unless I withdraw from it…And so it arrived: today a paid representative of the LIC/LIT lobby group LICAT, Dom McCormick, launched a crazy ad hominem assault on me to divert attention

1

Ken Henry clawbacks anyone?

Thanks Ken, via AFR: At the same time National Australia Bank (NAB) was pushing back on the corporate regulator’s investigation into the fee-for-no-service scandal, several of the bank’s own internal reviews had identified major deficiencies in its record keeping and risk management systems, which are now the subject of a Federal Court lawsuit. As chairman

7

RBA: Banks need to derisk offshore borrowing

Has the RBA been hacked or what? More sense from The Bulletin from Kellie Bellrose and David Norman: Abstract Australian banks access large and deep foreign funding markets to supplement their domestic funding. Looking at the major banks’ worldwide operations, such offshore funding accounts for about one-third of their assets. This funding is raised in

5

LIC and LIT commissions banned

Looks like the at once all powerful yet invisble MB has done it again. Via Chris Joye: In one of the biggest shake-ups of the financial advice industry in years, the government’s Financial Adviser Standards and Ethics Authority has blanket-banned conflicted sales commissions, including previously acceptable “stamping fees”, for advisers recommending listed investment funds to both retail

68

Deluge of lenders offer tax-payer backed sub-prime mortgages

Vai The Advisor: Twenty-six additional lenders have been appointed to the initial panel of the government’s First Home Loan Deposit Scheme, including major bank, Commonwealth Bank. The National Housing Finance and Investment Corporation (NHFIC) has announced its full panel of lenders taking part in the federal government’s First Home Loan Deposit Scheme (FHLDS). Following on

18

ASIC moves mortgage lending beyond HEM

The Australian Securities and Investments Commission (ASIC) has released a “principles-based” responsible lending road map that seeks to replace the flawed Household Expenditure Measure (HEM) – a relative poverty estimate – used widely by banks in the lead-up to the Hayne Royal Commission: ASIC commissioner Sean Hughes said the examples provided by the regulator were

1

NAB still doing dodgy deals

Via Banking Day: Another rollicking chapter in the National Australia Bank’s dismal risk management history was etched into the parliamentary records yesterday, with group chief risk officer Shaun Dooley moving to distance the company from observations made by former chairman, Ken Henry. In evidence given before a hearing in Melbourne of the joint parliamentary committee

3

HEM date with destiny set

Via the AFR: The Federal Court has set a date for the appeal against the “Wagyu and shiraz” judgment, however the regulator will be meeting a different adversary than the one it faced off against in the first half of 2019. The Australian Securities and Investments Commission will front up to a full bench of Federal

35

Mwahaha: Citi hikes mortgage rates

Via Banking Day: Citibank is facing a backlash from politicians and consumer groups this morning after moving to claw back recent home loan rate cuts from new borrowers. In a controversial move that undermines the Reserve Bank’s efforts to relieve pressure on household budgets and boost spending in the economy, Citi yesterday became the first

4

Centre Alliance patriots attack pay day lenders

Via Banking Day: The Centre Alliance Party is employing an unusual strategy to put pressure on the government to legislate reforms to the small amount credit contract and consumer leasing markets. It has introduced separate bills in the House of Representatives and in the Senate, which both mirror legislation the government drafted in 2017 but

6

Austrac coming for NAB

According to Banking Day: Ross McEwan, NAB’s new CEO, is in a hurry. NAB has admitted to a litany of breakdowns in systems and governance relating to money laundering and terrorism financing. Reported by The Australian newspaper on Saturday, the leak looks like an effort to preview what may well be an imminent statement of

11

Budget and RBA confront “material downside” in capex

Via Westpac’s Andrew Hanlan: 2019/20 capex plans Overview Capex plans for 2019/20 have been downgraded, largely led by services. Business capex plans are lopsided, with strength in mining and weakness in services. This is consistent with the fundamentals (a challenging and uncertain global backdrop and weak demand domestically) and consistent with our reading of the

50

Westpac bows to the inevitable

I was mid incredulous post when the news came through: Westpac’s chief executive Brian Hartzer will step down from Monday, with chairman Lindsay Maxsted to bring forward his retirement to the first half of 2020. Additionally, non-executive director Ewen Crouch will not seek re-election at the upcoming annual general meeting. The current chief financial officer

3

Choice demands mortgage broker best interest duty

The mortgage broking industry successfully fought off the Hayne Royal Commission’s recommendation that trailing commissions be abolished and that banks stop paying upfront commissions to brokers. It is also trying to leverage its influence within the Coalition to overturn common-sense rules requiring the industry to act in the best interests of its clients, as applies

37

Westpac steers towards disaster

Dear, deary me. Via the ABC: Westpac has frozen bonus payments for its entire executive team and several members of general management as it gets to the bottom of its money laundering scandal. Financial crimes watchdog AUSTRAC is taking Westpac to court, accusing it of committing 23 million breaches, including failing to adequately monitor the accounts

14

Westpac faces the inevitable

There are a few efforts to hose down Westpac’s AML disaster today, at the AFR: The bank’s message, subtly transmitted in the past 24 hours, suggests that the number of alleged child cases was small – amidst a humungous list of 23 million breaches of the anti-money laundering and counter-terrorism financing laws the regulator has

8

OECD slays Budget, RBA growth outlooks

Via the OECD today: Trade conflict, weak business investment and persistent political uncertainty are weighing on the world economy and raising the risk of long-term stagnation, according to the OECD’s latest Economic Outlook. World GDP growth is expected to be 2.9% this year – its lowest annual rate since the financial crisis – and remain at

6

NAB next to be mown down by AUSTRAC

Via Banking Day: At the heart of Austrac’s case against Westpac is a series of arrangements with foreign banks (correspondent banks) designed to make the processing of cross-border payments cheap and easy. Austrac says these arrangements gave rise to a number of risks, including cross-border movement of funds (including from higher risk jurisdictions), limited information