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.
From Chanticleer today on the royal commission: Orr asked Henry what roll the Australian Prudential Regulation Authority should be doing to be satisfied that boards are ensuring their companies have a strong risk culture. “I don’t know whether this is the appropriate forum to say, but I will say it here now anyway,” Henry said.
Via S&P: Australian prime home loan arrears fell in September, according to a recently published report from S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages, declined to 1.33% in September from 1.36% in August. Arrears typically fall at this point in the annual cycle, though the current arrears level
From Christopher Kent, Assistant Governor RBA (Financial Markets): Introduction Good afternoon, and thank you to the Australian Securitisation Forum for their invitation. It’s a pleasure to be here. Today I’ll provide an update on developments in the markets for housing and housing credit. These markets are closely related and both are of considerable interest to those
Via Banking Day: CLEARLY DEFICIENT: ‘No saving NAB this time’ ASIC chair James Shipton did not quite tell Rowna Orr (pictured) at the banking royal commission. NAB’s inability to fully remedy illegal conduct in the foreign exchange market was laid bare in Friday’s hearing of the royal commission into misconduct in banking. In December 2016
More good work today from Martin North to block deposit bail-ins As we await formal responses from the regulators, I discuss Bail-In with Robbie Barwick from the CEC. They have launched a campaign to make a change to the law to specifically exclude deposits, and they have new evidence that despite what many in Government say,
Via Banking Day: Then the mood changed, as Orr asked him about the tone of regular meetings between senior ASIC officials and the board member and senior executives of the entities ASIC is regulating, as part of ASIC’s “stakeholder engagement strategy”. While he denied any hint of collusion or a softly softy style approach, Shipton
From S&P: – Tightened access to credit will affect refinancing conditions, but not for all borrowers. Borrowers with modest loan-to-value ratios, higher seasoning, and amortizing loan profiles are in good stead. Such borrowers make up a majority in most Australian RMBS portfolios. – We expect mortgage arrears to remain low in most portfolios, with modest
Via Chanticleer today: Kenneth Hayne looks like reshaping the governance of Australia’s leading public companies judging from the line of questioning directed at Commonwealth Bank of Australia chairman Catherine Livingstone and chief executive Matt Comyn. Based on the the lines of inquiry pursued by counsel assisting, Rowena Orr, QC, the Hayne governance era looks something
Via Fitch: Seasonal Decrease in Arrears: The 30+ days’ arrears fell by 4bp qoq to 1.04% during 3Q18. Fitch Ratings has observed a drop in third-quarter arrears for the previous decade. Falling House Prices: National dwelling prices continued to decline in 3Q18, led by falls in Melbourne, which dropped by 2.33% from the
Via The Urban Developer: In residential property, the law of unintended consequences is hurting a significant number of property developers, driving some businesses to a grinding halt and others to the brink of failure. There’s a combination of factors at work here creating a perfect storm for developers: APRA’s Macro-Prudential Lending Guidelines The requirements of
Game over. Via ABC coverage of CBA CEO Matt Comyn at the Hayne Royal Commission yesterday afternoon: Rowena Orr has moved on to CBA’s own lending practices, particularly its extensive use of the Household Expenditure Measure (HEM). For those of you who don’t remember the HEM from the first round of hearings, it is a relatively low-ball measure
Via InvestorDaily. APRA’s deputy chair John Lonsdale made the comments at FINSIA ‘The Regulators’ event saying that Australia had endured 27 years of continuous expansion but no summer lasts forever. “Australia’s unprecedented period of uninterrupted economic growth may have years yet to run. We hope it does. “But when our economic summer inevitably ends –
We know all of the dry tinder. The big pile of external liabilities piled high in unproductive assets protected by the firebreak of public guarantees from a clean public sheet. But the next downturn could bring something that will set fire to all of this virtually overnight: Italexit. Via Albert Edwards, king bear: The orthodox
Via Domainfax: National Australia Bank chief executive Andrew Thorburn took a luxury Fiji holiday and a Thermomix arranged through a company under police investigation over accusations it bribed his chief of staff to win contracts from the bank. Fairfax Media can reveal that the NSW police have uncovered information that Mr Thorburn’s former chief of
Gotti is onto it: The share markets’ danger signals are telling the Reserve Bank economists to leave their Martin Place bunker and go out into the real world. Go and talk to bank branch people (not CEOs) and learn how APRA rules are cutting bank lending by at least 20 over cent but usually by
Yesterday’s Federal Court decision to stomp on ASIC’s WBC settlement has all tongues wagging. Martin North sees as bullish: The use of HEM may well be back in play, following the latest from the Westpac ASIC case. Given that at some banks HEM is still being used for around half of applications, and the Royal Commission commented
Via The Advisor: ANZ has informed brokers that it will introduce enhanced home loan verification requirements, effective from 20 November. Key changes include the following: PAYG income: Brokers are required to obtain three months’ bank statements showing salary credits in order to verify income (in addition to payslips). For casual, temporary and contract employees, six months
Via the AFR comes $2bn for small business from Amateur Treasurer Josh Frydenberg: The creation of a taxpayer-backed securitisation fund to invest in small and medium enterprise (SME) credit will also potentially expand an asset class for institutional investors such as superannuation funds to invest in. Treasurer Josh Frydenberg and Small Business Minister Michaelia Cash
UBS’s Jonathon Mott has led the sell side on the housing bust and he’s refusing to be headed now. His new note proposes a worst case scenario in which Aussie house prices crash 30%, the RBA cuts rate to zero and launches quantitative easing, and banks are crushed by cascading bad debts, cut dividends and
Via the ABC: In an extraordinary move, the Federal Court has refused to approve a $35 million penalty for Westpac, despite the bank admitting it broke responsible lending laws.The penalty was a negotiated settlement between Westpac and the Australian Securities and Investments Commission (ASIC).However, in a highly critical judgment, Justice Nye Perram said “admirable ingenuity
Via Banking Day: Westpac will pay the maximum penalty – A$3 million – for its unconscionable conduct and breaches of its financial services licensee obligations for its trading in the bank bill swap market on five occasions in 2010. Justice Jonathan Beach on Friday noted that was “the maximum penalty that can be … Clearly
It would be amusing if it were not so horribly corrupt, via the AFR comes Amateur Treasurer Josh Frydenberg mainlining panic straight into bank executive veins: “I would encourage the banks when it comes to lending, in particular for small business, make sure you get the balance right, keep the books open and don’t lose
Oh boy. ANZ is preparing for tough times, via the AFR: …From November 25 the bank will be using new “comprehensive credit reporting” checks by having third-party agencies check on applicants’ credit card, home, personal, or car loan debt. In addition, mortgage brokers will be required to provide “enhanced verification” about applicants’ income and rental
Via the always excellent Jonathon Mott at UBS today: (1) ‘Underlying’ revenue fell -1.3% (h/h); (2) NIM was down 7bp to 199bp; (3) Average Interest Earning assets grew just 1.4% as the banks further tightened underwriting and continued to run off low yielding institutional assets; (4) Fee income and markets revenue were weaker; (5) ‘Underlying’
As we know, the corrupt RBA, Treasury and APRA are working behind the scenes to prevent any meaningful reform to Australia’s corrupt banking industry. Today they get clear instructions from their bosses on what needs to be protected, via The Australian: In submissions to Mr Hayne’s interim report that were released by the commission, the
Via Martin North: APRA has released a paper on Loss-Absorbing Capacity of ADI’s. It shows that currently major Australian banks are at the lower end of Total Capital compared with international peers. As a result of proposed changes, major banks (Domestic systemically important banks in Australia, D-SIBs) will see their funding costs rise – incrementally over
Via The Australian: Macquarie Group is locked in talks with Austrac to resolve “an issue” with its financial reports, joining National Australia Bank and Westpac in having to address problems with the anti-money-laundering and terrorism financing regulator. A cache of submissions to the royal commission into financial sector misconduct released late yesterday also revealed AMP
Via Martin North: We have completed our October 2018 mortgage stress analysis and today we discuss the results. The latest RBA data on household debt to income to June reached a new high of 190.5. This high debt level helps to explain the fact that mortgage stress continues to rise. Having crossed the 1 million Rubicon
CBA is out with its trading update. Here is Martin North with the detail: CBA released their 1Q19 trading update today. Their unaudited statutory net profit was approximately $2.45bn in the quarter and unaudited cash net profit was approximately $2.50bn in the quarter, both rounded to the nearest $50 million. The cash basis is used
Martin North and John Adams destroy Wayne Byers reappointment: More at Banking Day: High profile consumer campaigner Naomi Halpern, who was instrumental in securing parliamentary support for financial advice reforms in 2014, said victims were stunned by the government’s decision to extend Byres’ tenure given that the royal commission was still investigating the enforcement record of
