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.

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

14

Austrac sues Westpac for money laundering

Oh dear, via ABC: AUSTRAC has applied to the Federal Court for civil penalty orders against Westpac for deficient oversight of its anti-money laundering and terrorism financing obligations. AUSTRAC boss Nicole Rose described Westpac’s behaviour as “serious and systemic non-compliance”. And the AFR: It alleges that between November 2013 and September 2018 the bank was

2

APRA transparency drive

Via Banking Day: Both APRA and potentially the banks it supervises are being pushed toward a culture of openness, a challenging theme for the industry in 2020. John Lonsdale, deputy chair of APRA told a FINSIA event in Sydney on Friday that “as in so many other areas of our work, APRA has to find

6

ASIC hoses Costello push for mortgage fraud

Peter Costello covered himself in glory again this week: Former federal treasurer Peter Costello says Australia’s monetary policy has probably run its course and believes some changes to responsible lending laws would stimulate the economy. Mr Costello said there was “a lot of intervention” following the Hayne royal commission earlier this year, which may have

11

Where did the rate and tax cuts go? Debt

Recessionberg is looking for tax cuts. Via Domain: The Morrison government is looking at ways to deliver tax relief to middle income earners as a much-needed boost to the economy after the nation suffered its biggest one-month fall in jobs in more than three years. Treasurer Josh Frydenberg said the government was “always looking” at

6

More on the CBA complaints boom

Via the ABC: The recently formed Australian Financial Complaints Authority (AFCA) opened its doors to receive financial complaints during the tail end of the banking royal commission, and there has been a rush of Australians venting their spleens ever since. Those complaints have come from far and wide but a large number have been centralised

1

CBA best zombie in class

CBA’s result is out and, as usual, it is best in class. The problem is, it is a class of zombies: Solid profit versus others but remediation is worse too and NIM is a problem that will get worse (even if CBA continues its tradition of being least transparent about it): Credit quality is a

8

CBA by far the worst bank for complaints

Via Banking Day: Commonwealth Bank was the subject of the highest number of complaints to the Australian Financial Complaints Authority over the year to June, with the other big banks not far behind. Others big-time offenders included ANZ, Suncorp, NAB, Westpac, IAG, Citigroup, finance company Multipli, QBE, American Express, Latitude and PayPal. CBA was way

7

Westpac loosens HEM for specufestors

Via Banking Day: Westpac has flipped another card in a bid to revive its anaemic mortgage business by loosening the household expenditure benchmark it uses to assess investment borrowers. In a notification to brokers on Wednesday,  the bank said it was overhauling the formula used to determine the Household Expense Measure band for investors. Under

2

RBNZ tears APRA a new one

Via Ian Rogers at Banking Day: The Reserve Bank of New Zealand is the agenda-setter in Australian banking, the central bank preparing for a great industry crisis in Australia and fearful it will unfold soon. Australia is chronically overdue for a banking crisis (although APRA never says) and the industry is woefully under-provisioned and under-capitalised