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.
Desperation, thy name is Recessionberg, via AFR: The federal government has backflipped on a key recommendation of the banking royal commission and will no longer ban trail commissions for mortgage brokers from 2020, as it promised to do last month. Instead, it will hold a review into whether trail commissions should be kept from 2020 onwards.
By Leith van Onselen Shadow financial services minister Clare O’Neil will use a Committee for Sydney speech on 12 March to reveal that Labor will reject only one recommendation in the Hayne royal commission’s final report if it wins the upcoming federal election. Labor has joined the Coalition in opposing the proposal to shift the
Via The Australian comes UBS’s George Tharenou: “My framework here is that the regulatory tightening is accelerating, so the only effective policy lever available in the near term to stimulate the economy is the cash rate,” he says. “There’s a view that the royal commission was benign because it didn’t change law, but we never
Via UBS’ excellent Jonathon Mott today: The recent reporting season highlighted the revenue pressure the banks are under. The substantial mortgage repricing undertaken by the banks over the last six months has already been largely offset by: higher funding costs; front-book discounting; switching from Interest-Only to P&I; mix changes from Investors to Owner Occupiers and
The ABC seems to think so: When Renee Vanson went to her bank, she thought she was in a strong position to refinance her loans. “If you’ve got no outstanding debts, you’ve got your insurance, school fees for the year, power, phone, petrol — and you’re still saving money as well — who’s to say that
Via Nathan Lynch of Reuters via Banking Day: The Australian corporate regulator is pushing ahead with a landmark case against some of Commonwealth Bank’s existing and former board members over the organisation’s anti-money laundering (AML) failures. The civil case is shaping up to be one of the first under the Australian Securities and Investments Commission’s
By Leith van Onselen Queensland-based Suncorp Group has advised that a $120 million residential mortgage bond may not be able to repay all investors. The bond’s distributions have been thrown into doubt because the proportion of borrowers in arrears had reached a ‘trigger’ point. The bond dates back to 2010, so borrowers have been meeting
By Leith van Onselen The noose is slowly fastening around Australia’s mortgage industry. The Hayne royal commission found that mortgage lenders had not adequately assessed borrowers’ capacity before extending credit, instead relying on the Household Expenditure Measure (HEM) – a relative poverty measure that estimates expenditure at the lower end of the income scale. This
Westpac’s excellent February 2019 Housing Pulse contains interesting information on mortgage arrears, which are rising across the four major markets: Mortgage arrears provide a timely indicator of urgent or distressed sales – the presence of which can precipitate significant price weakness. For most existing home owners there is a degree of optionality when it comes
By Leith van Onselen Labor proposes to establish a Financial Rights Fund if it wins the upcoming federal election, which will assist victims of misconduct in the financial services sector. This ‘fairness’ fund will be financed via a new levy on Australia’s largest financial institutions, and is slated to raise $160m annually over four years.
Via Banking Day: The plaintiff law firm said the class action was being run in the Federal Court on behalf of people who, after 1 January 2011, were given “unsuitable loans” by Westpac, in breach of its responsible lending obligations. …Principal lawyer and managing partner with Maurice Blackburn, Ben Slade, said: “This case will seek
Via Banking Day: APRA fronted the Senate Economics Legislation Committee – better known as the Senate estimates committee – yesterday and covered a grab-bag of topics, with the overarching theme that this year will be a much tougher brand of regulation. APRA and ASIC will need to be tougher, in order to justify a raft
The housing panic has set in for the incoming government, via the AFR: Labor will outbid the Coalition on banks today by promising a vastly more generous compensation scheme for victims of financial service wrongdoing, including payments of up to $2 million for individuals and small businesses. …It will announce the lender will pay an
By Leith van Onselen Westpac will face a class action in the federal court for issuing home loans that breached responsible lending rules. From SBS News: Westpac is facing a class action for allegedly giving loans to people who couldn’t afford to pay them back. The class action, in the Federal Court, is the first
Via the AFR today: Industry sources said one of Labor’s proposals was that the lender paid the broker a flat fee regardless of the size of the loan, rather than a fee that is a percentage of the loan. This change would discourage brokers talking people into borrowing more than they need to increase the
But records are made to be broken. Via S&P: Australian Prime Home Loan Delinquencies Rose In December; 90-Plus Days Arrears Hit Record High MELBOURNE (S&P Global Ratings) Feb. 20, 2019–Australian prime home-loan arrears rose in December, according to a recently published report by S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian
Via the AFR: The chief executives of the four big banks will be made to face Parliament twice a year to report on progress in implementing the banking royal commission reforms, as part of a boosted accountability regime Labor will introduce if it wins the election. As well, the banks, the regulators ASIC and APRA
Not involved in any succession arrangements: Emigration looms as an option.
By Leith van Onselen The CEO of consumer advocacy group Choice, Alan Kirkland, has penned an enlightening article lashing the mortgage broking industry, claiming it is using the same dirty tricks deployed by the advice industry when it was forced to move from a commissions-based model under the FoFA reforms: Within hours of the final
Via ANZ’s new profits release: As I noted last week, ANZ had indeed led the specufestor clamp down: It’s a great shame they’re turning that around. That said, I do not expect it to make much difference to systemic growth. I was thinking of rewarding the bank with my own business. No longer.
By Leith van Onselen The mortgage broker locusts continue to swarm politicians over the Hayne Royal Commission’s recommendation to overhaul mortgage broking from a commission-based to a user-pays system. The head of the country’s biggest retail mortgage broker, Aussie Home Loans chief James Symond, is mobilising brokers across Australia to lobby politicians to retain the
By Leith van Onselen Westpac has announced its Q1 trading update, which revealed a flat profit result: Westpac also posted a slight uptick in mortgage delinquencies: However, 90+ day delinquencies rose sharply, driven by WA: Whereas the share of interest-only mortgages fell sharply to 32% from 46% in September 2017:
By Leith van Onselen While all the focus has been on the housing credit crunch and the sharp slowdown in mortgage lending, it’s easy to miss the fact that personal lending has also taken a hammering, falling for more than three consecutive years: Now there are fears that in the fallout from the banking royal
Via AFR: Many more voters trust Labor than the Coalition to implement the recommendations of the banking royal commission, according to a poll that also shows Josh Frydenberg and his rival Chris Bowen level-pegging as the nation’s preferred treasurer. The latest The Australian Financial Review-Ipsos poll, the first for this political year, shows almost half
Do not expect any loosening of credit in this cycle, via AFR: The corporate regulator’s chief prosecutor, Daniel Crennan, QC, has warned the government has empowered him to pursue “extremely harsh civil penalties and criminal sanctions against banks, their executives and others” after the Senate passed tough new rules for white-collar offences. Corporate executives could
By Leith van Onselen Consumer groups have lashed the mortgage broking industry for pretending to care about reform while vigorously lobbying politicians to protect their commissions. From SBS News: The consumer groups that were part of a forum with the mortgage-broking industry have quit en masse, citing a lack of progress and willingness to change.
Via The Australian: Ken Henry is nothing if not staunch in his self-belief. His friends have often described him as the “great oak” – the stronger the wind blew, the harder he pushed back. For months since a disastrous appearance before the Hayne banking royal commission last year, Henry was convinced that he had done
Via AFR: The Australian Securities and Investments Commission (ASIC) has released updated guidance on how banks should verify customers living expenses before lending, to meet its expectations regarding the responsible lending laws. Lenders using the Household Expenditure Measurement (HEM) as a benchmark will need to apply a “reasonable buffer” reflecting the benchmark is too low.
By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) clearly does not trust APRA to do its job and protect the economy. Because the RBNZ has launched a proposal to raise tier 1 regulatory capital held by the banks to 16%: Under the proposal, over five years or so, banks’ Tier 1 capital
If you thought the banks were about release the spiggot on credit think again, via the AFR: The federal government has told the banks and regulators there will be a fresh industry inquiry in three years to ensure they have improved their behaviour and are treating customers better. Treasurer Josh Frydenberg wrote this week to
