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.

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The rise and rise of dodgy ‘liar loans’

By Leith van Onselen Late last year, investment bank UBS released a series of reports (here and here) claiming that of the 1,228 Australians surveyed who had recently taken out a mortgage, 28% stated their application was not factually accurate, with broker-originated mortgages the most dodgy. Now, The AFR is reporting new analysis of loan

10

Creighton: Basel capital rules have caused financial systems serious harm

By Leith van Onselen The Australian’s Adam Creighton has written a ripper article today on the damage caused by the Basel capital adequacy accord, which Creighton argues has sown the seeds of financial crises across the globe: During the Basel Committee’s almost 30 years of deliberation — the first version of the Basel rules emerged

2

Gluttonous Aussie banks pause from binging on offshore debt

By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released its National Financial Accounts for the September quarter, which revealed a small 0.2% quarterly fall in Australian banks’ gross external liabilities (offshore borrowings) in the September quarter, but a significant 4% reduction over the year and a sharp contraction relative to Australia’s GDP.

5

S&P: Home loan arrears fell in October

From Standard and Poors: MELBOURNE (S&P Global Ratings) Dec. 18, 2017 — Delinquent housing loans underlying Australian prime residential mortgage-backed securities (RMBS) fell to 1.04% in October from 1.08% in September, according to a recent report by S&P Global Ratings. We attribute part of the decline to a rise in outstanding loan balances during the

19

AUSTRAC expands CBA terrorism allegations

Via The Australian: The anti-money laundering agency has dramatically expanded its suite of allegations against the Commonwealth Bank, with new claims the nation’s largest bank failed to adequately monitor suspected terrorist financiers and alert them to authorities. …The bank now faces more than 53,800 alleged contraventions of the anti-money laundering act. Six transactions by five

10

AUSTRAC piles pain upon Sleaze Bank

Via the AFR: AUSTRAC will up the ante in its case against the Commonwealth Bank of Australia, with the transactions regulator expecting to file fresh allegations on Thursday that it breached the law 100 additional times while facilitating banking by criminal syndicates involved in money laundering and terrorist financing. Commonwealth Bank filed its defence to

13

David Murray slams Banking Royal Commission

David Murray did a terrific job of his banking inquiry and he may have a point today: Australia has moved from a banking royal commission proposal that was not needed on either stability or economic hardship grounds, to one which is needed to rebuild trust and confidence to protect the stability we already have. When the government announced the royal

8

Macroprudential 2.0 pulls handbrake on interest-only mortgages

APRA released its Sep QTR banking property exposures yesterday and we can update progress of the MP2.0. First, the progress towards 30% of mortgage stock being interest-only is good, falling to 35%: It was largely driven by mortgage flow as interest-only issuance tanked to just 17% of the total: When stock catches down to flow then

30

The Banking Royal Commission fix is in

Via Banking Day: Kenneth Hayne, 72, a conservative and a former justice of the High Court of Australia has the gig as the sole commissioner of the planned royal commission into misconduct in financial services. The prime minister, Malcolm Turnbull, announced the selection of Hayne on Friday, a day after the government set out the

16

RC hits bank credit market with a whimper

The AFR is feeding the panic: Foreign investors say the Turnbull government’s snap Royal Commission into the Australian financial services sector is a new deterrent to investing in the country’s banks and will further challenge their profit growth at a time of elevated risks in the property market. UK-based Invesco Perpetual fund manager Tim Dickson

11

All you really need to know about the Bank Royal Commission

Via UBS: Prime Minister confirms a Royal Commission into the Financial Services sector Following an extended period of discussion, Prime Minister Malcolm Turnbull confirmed Cabinet has met this morning and has determined the only way we can give all Australians a greater degree of assurance is a Royal Commission into misconduct in the financial services

44

Evil Anna must resign or be sacked

Via AFR comes Evil Anna: Homeowners face the prospect of higher mortgage rates as a result of the royal commission into the banks, the Australian Bankers’ Association has warned. Chief executive Anna Bligh warned that the local banks’ borrowing costs could rise as offshore lenders regarded them as riskier prospects because of the uncertainty surrounding the royal commission.

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Gottiboff: Goodbye credit, farewell house prices

Gottiboff panic! Can’t say I disagree at this point, though: The banking inquiry combined with regulator-driven clamps on lending will initially boost banking profits and margins but they will create a longer term threat to dwelling prices. But that’s just the start. When you put an industry like banking under extreme pressure surprising things happen.

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Banks order Do-nothing Malcolm to do royal commission. And he does

Do-nothing Malcolm has his orders now: 30 November 2017 The Hon. Scott Morrison, MP Treasurer Parliament House CANBERRA ACT 2600 Via Email Dear Treasurer We are writing to you as the leaders of Australia’s major banks. In light of the latest wave of speculation about a parliamentary commission of inquiry into the banking and finance

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Banking Royal Commission a mortgage mushroom cloud

Via LF Economics: With a Banking, Insurance, Superannuation and Financial Services Commission of Inquiry likely to go ahead, banks and financial regulators will be under the spotlight as never before. Forensic analysis and research pertaining to the identification of systemic financial crimes is one of the specialties of LF Economics; hence, our insight can shed

4

The Greens are right to oppose ‘fake’ banking Inquiry

By Leith van Onselen Yesterday, it was revealed that the banking Commission of Inquiry (basically the same as a Royal Commission) being pursued by the Nationals was fake, with a whole bunch of key areas of banking malfeasance likely to be omitted from investigation: Under the government backbencher’s proposal, the inquiry could elect to skirt

16

CBA tightens mortgage conditions

Via The Parasite: The big four bank has today revealed a raft of changes, including LVR caps and restrictions to rental income serviceability, that will impact mortgage brokers and their clients from next week. On Saturday (2 December), CBA will be introducing a new Home Loan Written Assessment document called the Credit Assessment Summary (CAS)

4

Nats Bank Royal Commission another fake

Via Banking Day: Under the government backbencher’s proposal, the inquiry could elect to skirt any matters currently before the courts and others under investigation by government regulators and law enforcement agencies. That might curtail the inquiry’s ambit considerably and might rule out evidence from known victims of poor financial advice whose grievances are still subject

10

ASIC targets Aussie mortgage fraud

By Leith van Onselen Back in March, the Australian Security and Investments Commission (ASIC) revealed that it was investigating 11 lenders for dodgy practices. The following month (in April), ASIC announced further measures to promote responsible lending in the home loan sector, taking particular aim at interest-only mortgages. Then in October, ASIC released its review

58

John Howard calls banking Royal Commission “socialism”. Ignores taxpayer subsidies

By Leith van Onselen You’ve gotta love the myopic view of former Prime Minister, John Howard, who yesterday called a proposed Royal Commission into the banks “rank socialism”. From The Australian: Former prime minister John Howard has slammed a royal commission into the banks as “rank socialism”, warning the Coalition that embracing such a policy

16

Westpac tightens again

Via AFR: Westpac Group will this weekend upgrade its key measures for assessing property borrowers’ capacity to service their debt, amid intense pressure from regulators to provide better insights into households’ financial commitments and vulnerability to financial stress. The bank, which includes Bank of Melbourne, BankSA and Bank of St George, is the first to

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Bank royal commission imminent as The Idiot says no

Via The Australian comes The Idiot: Maverick LNP MP George Christensen yesterday said he remained committed to crossing the floor on a banking inquiry, but will not do so before Barnaby Joyce’s December 2 by-election. Queensland Nationals senator Barry O’Sullivan has also indicated that as many four Coalition MPs, including Mr Christensen, could provide the

28

Gottiboff: Nationalise the banks to free credit

From Gottiboff today: If former Prime Minister Ben Chifley were alive today his heroes would be Treasurer Scott Morrison and APRA Chairman Wayne Byres. Given the banking scandals, quasi-nationalisation is a highly popular stance but I believe that at this particular time of our history it is extremely dangerous. Heaven forbid, but in theory, it

12

APRA tightens lending standards again

Suck it up, Gottiboff. Bravo, just now. Housing – The importance of solid foundations WAYNE BYRES Chairman 21 November 2017 Keynote address at the Australian Securitisation Forum 2017, Sydney Good morning, and thank you to the ASF for the invitation to be part of this year’s conference. My APRA colleagues have made regular appearances at

10

Gottiboff panics over improving lending standards

From Gottiboff today: It’s conventional to blame APRA and the regulators’ new rules but the credit squeeze motivation goes deeper and I think it is multiplied by a middle management confidence loss stemming from the looming retrenchments, the scandals and now building up to the real possibility of a Royal Commission. Not surprisingly, the bank