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.

61

Aussie mortgage fraud triggers $80bn class action

Perhaps mortgage control fraud doesn’t pay in the long run, via the AFR: Lawyers’ representing up to 300,000 litigants are planning an $80 billion action against mortgage lenders, mortgage brokers and financial regulators in a class action that would dwarf previous actions. …Roger Brown, a former Lloyds of London insurance broker, said he already has

31

Careful what you say inside the CBA

Via the AFR, it just doesn’t pay to be bearish at the CBA: The allegations, by the head of the Institute of Internal Auditors Peter Jones, comes in response to criticism that internal auditors had lost their authority within large corporations, were too timid to “speak truth to power” and too readily intimidated into watering

33

Chris Joye’s infinity ATM

Via our Chris today, whose royal commission objections are mounting towards jihad: Labor fundamentally undermined the integrity of the financial system by partially shifting responsibility for repaying debts from the borrower to the lender, which is insane. Now lenders, not borrowers, are liable for understanding borrowers’ financial circumstances and verifying whether they can service a

15

Mortgage arrears resume uptrend

Via S&P: Australian home loan arrears rose in March. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages increased to 1.18% in March from 1.16% in February, according to a recent report by S&P Global Ratings. Mortgage arrears remained relatively unchanged year on year in March and are lower than the decade-long average

15

Ken Henry confesses to bank control fraud

Westpac chairman Ken Henry yesterday entered the royal commission debate: When historians of finance look back on this period they will identify an unusual level of corporate complacency driven by relatively benign macroeconomic conditions and a long period of impressive ROE performance. They will suggest that corporate leaders fell into believing that a sector capable

29

Westpac’s blind, illiterate customer mirror image of bank

Swithed on banking at the AFR: The trail of documents used by Westpac to support a business loan for a failed franchise and led the loan’s guarantor to lose her home were haphazard, inconsistent and incomplete the Hayne royal commission has heard. It follows earlier hearings on consumer credit and financial services that also highlighted the insufficient and

10

If only the banks had the RBA’s protection racket

More pain for the banks today, via Chanticleer: Hodge assured those in the room and others watching the live stream that commissioner Kenneth Hayne, who built a distinguished career ruling expertly on black letter law, wants to draw out the personal and emotional impact of banking misconduct. The commission has become a venue for reminding

32

CBA rogue bank now exploiting children

From the last journalist standing at Domainfax: Staff fraudulently activating school kids’ bank accounts to earn bonuses isn’t a victimless crime. Nor is the practice of faking customer referrals to meet performance hurdles and generate kickbacks – no matter how big or small. But that’s just what’s been going on inside Commonwealth Bank. It speaks

1

Joye furiously defends his bank debt

From Chris Joye today: One of the most enduring legacies left by the royal commission will be more conservative and risk-averse banks. This process was already underway after the Australian Prudential Regulation Authority (APRA) embraced the 2014 financial system inquiry recommendation that the banks deleverage. Since then the four majors have raised more than $50

20

CBA banks tighten mortgage standards again

Via the AFR: …Bankwest…is overhauling credit policy and treatment of residential apartments. Units equal to, or greater than 40 square metres, will be subject to an 80 per cent loan to value ratio (LVR), or up to 95 per cent for borrowers with lenders’ mortgage insurance. Units between 30 square metres and 40 square metres

6

Morgan Stanley: Sell Australian banks

From Morgan Stanley analysts Richard Wiles and Andrei Stadnik: We have a negative stance on the major banks as they have come to the end of a super cycle and now face a difficult transition, which features a combination of both operating headwinds and regulatory risks. We see fundamental change in the mortgage market, modest

4

Rats deserting sinking CBA ship

Via Domainfax: Commonwealth Bank chief financial officer Rob Jesudason has resigned, leaving new chief executive Matt Comyn with a sixth senior management role to fill as he works to rebuild the bank’s reputation amid a series of scandals. Alan Docherty has been appointed acting CFO while the bank undertakes an internal and external search for

16

How the great Australian banking control fraud was built

Some great stuff here from Phil Soos at LFEconomics: A comprehensive report was published by the Council of Small Business Organisations of Australia in 2010, explaining how the Australian Bankers’ Association (ABA) and subscribing banks have thoroughly subverted our system of co-regulation. This describes a system consisting of a combination of self-regulation and prudential regulation,

17

Treasury: Break up the banks

Via The Australian: Treasury told the royal commission into financial services that the second round of hearings had made it “clear” that poor culture and misaligned incentives were the “key cause” of misconduct, and said there were many benefits that could come from the major banks splitting up their financial advice and wealth management arms.

18

Mortgages rejected with “unprecedented strictness”

Via the AFR: ANZ has increased rates on its fixed interest in advance loans by eight basis points, or about $800 a year in extra annual interest on a $1 million loan…The bank, which is the most dependent of the major banks on brokers for distributing mortgages, is circulating “policy updates” about minimum evidence of

71

Time to break up the CBA

It’s a rogue bank, simple as that. In the past year it has been exposed for: predatory lending; poor risk controls; fraudulent insurance; fraudulent financial advice; charging fees to dead people; manipulating BBSW; manipulating forex; money laundering for mafia and terrorists; losing 20 million accounts to god knows who, and failing to report most of

44

Credit crunch: At auction “people just stood there looking about”

The AFR has gone full blown bear: …buyers without deposits of between 25 to 35 per cent are being squeezed out of the market by the tougher lending conditions, agents claim. …Borrowers with pre-arranged credit limits are also being reviewed by lenders before a deal is settled and lending limits being lowered, following tougher analysis