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.
Anna Bligh is back in the news at the AFR: The Australian Banking Association will outline ambitious plans to ban commission payments linked to legacy financial advice products, promise to stop charging dead customers and end the fees-for-no-service rort with a suite of changes to the banking code of practice to be announced on Wednesday.
Via the FT: The bank warned its full-year cash profit would be hit by A$697m ($492m) in costs related to customer remediation, software, restructuring and Australia’s public inquiry into the finance industry. The hit to profit from those items reflected a year-on-year increase of A$545m for the twelve months to the end of September. The remediation
Via Banking Day: The new and popular Bank Financial Strength Dashboard of the Reserve Bank of New Zealand may be extended to include “conduct” metrics, Toby Fiennes, head of prudential supervision, told an accounting forum last week. “In the wake of the recent Australian Financial Services Royal Commission’s interim report, there is much focus on
The AFR operates in a permanent state of cognitive dissonance. On the one hand it is supposed be all for “markets”. On the other it is the number defender of private vested interests in the country. This is no more clear than in its panicked propaganda campaign in recent weeks supporting Australian bank exceptionalism during
Via PIMCO: Australian housing prices have fallen for 15 consecutive months. The nationwide all-dwelling price index was down 2.0% year-on-year in August, with Sydney prices down 5.6%. This was Australia’s first nationwide housing price decline in six years. To be sure, prices remain 40% higher than levels in 2012, when abundant credit supply and strong
From the Herald Sun comes a nice list of financial crimes. Charging dead people: In April the commission revealed the sordid details in which planners from Commonwealth Bank subsidiary Count Financial profited for years from dead customers’ fees. In the worst case revealed, a planner knew a client had died in January 2004, but was
The AFR is today describing what will very likely become the next round of mortgage tightening, risk-aversion in banks: A major bank has a blacklist of 6700 apartment projects across Australia where buyers are refused loans or are offered reduced loan to value ratios (LVR), according to mortgage broker Home Loan Experts. …The reasons for
Given the clear move by corrupt media and regulators to curtail royal commission fallout, this is good policy and politics from Labor, at The Australian: Labor will hold its own meetings around Australia with aggrieved bank customers from today, in a bid to put pressure on the government to extend the banking royal commission hearings
APRA and ASIC may be the one’s left carrying the bag for Australian bank’s housing bubble excesses but they had good company in the RBA and Treasury. Following the GFC the RBA openly declared that Australian household debt was a clear and present danger to the economy yet when its mooted thirty year mining boom
The answer is “no”. There will be no explicit depositors bail-in. In would be political suicide. That said, there are any number of ways that deposits can be devalued: printing money, special taxes etc. And that is the path that Australia will take.
By Leith van Onselen With the interim report into the banking royal commission released on Friday, Labor has called for an extension beyond the next election to ensure that more victims are heard and that the next federal government has the opportunity to implement the recommendations. From 9News: The opposition is concerned not enough victims
By Leith van Onselen The interim report into the banking royal commission was released on Friday, which admonishes the greed inherent across Australia’s financial system and the lack of oversight by our captured financial regulators. Below is the Executive Summary: The Commission’s work, so far, has shown conduct by financial services entities that has brought
APRA has released its Insight Issue 3 2018, which contains the following explanation of its latest bank stress test results: Stress testing plays an important role for both banks and APRA in testing financial resilience and assessing prudential risks. This article provides an overview of APRA’s approach to stress testing, with insights into how APRA developed the
Via The Australian: A horde of Australia’s biggest financial institutions and superannuation funds have been forced by the prudential regulator to ram through an in-depth review of their culture and governance before the royal commission ends next year. After copping heavy criticism over the course of Kenneth Hayne’s royal commission over a lack of enforcement
This week on the MB Fund podcast we have a timely chat to friend of MB, Philip Soos, who is an independent economist, PhD candidate investigating bank crime and mortgage control fraud and co author of the book, Bubble Economics – Australian Land Speculation 1830 to 2013 with Paul Egan. Below is the performance of
And so it begins: The key elements include: Increased provisions for customer refunds associated with certain advice fees charged by the Group’s salaried financial planners due to more detailed analysis going back to 2008. These include where advice services were not provided, as well as where we have not been able to sufficiently verify that
By Leith van Onselen With the interim report into the banking royal commission due to be released tomorrow, Labor continues to pressure the Morrison Government to extend the inquiry: Labor says only 27 victims have so far had their stories heard, out of more than 9300 submissions. “If the banking royal commission needs to be
Via The Australian: The seven heavy volumes of the Hayne royal commission’s interim report will land with a thud on Josh Frydenberg’s desk tomorrow. They will call for much higher standards governing bank lending practices and stronger criminal penalties for breaches. The Treasurer is on the front foot, announcing draft legislation yesterday that would impose
More great work from Martin North today as he discusses the fallout from the Hayne Royal Commission with Professor Gill North: The conclusions are sobering for banks, brokers, regulators and credit provision going forward. The violations of responsible lending laws includes: inappropriate use of high risk and interest-only loans; failure to obtain data for loan
More good work from Lyndsay David today as APRA fails to cough up an FOI request: APRA ordered the “targeted review” in October 2016. It was conducted by PWC for WBC and CBA: Background Under its supervisory powers, APRA is able to request banks to commission special purpose (or “targeted”) reviews into topics on which
Analysts are getting more and more bearish on the banks, at the AFR comes Morgan Stanley with $65 target on CBA: Scenario one would be mildly bearish for CBA stock but is also the most likely in Morgan Stanley’s view, with the broker assigning a 50 per cent probability to the mildly negative outcome where
By Leith van Onselen The Australian Securities and Investments Commission (ASIC) yesterday released a Review of selected financial services groups’ compliance with the breach reporting obligation, which examined the breach reporting processes of 12 financial services groups, including the big four banks (ANZ, CBA, NAB and Westpac) and AMP. The report was damning, finding that the
It’s farewell to the SMSF mortgage, thank goodness: AMP is set to axe new residential and commercial lending for self-managed super funds, making the wealth giant the last of the major providers to withdraw from the controversial sector amid falling property values and rising regulatory concerns. The nation’s largest financial conglomerate will also tighten controls
So far, so good, via Moody’s: Mortgage delinquencies will increase moderately Australian RMBS delinquency rates, which were broadly stable over the three months ended 30 June 2018, will rise moderately over coming quarters, with high debt levels and higher interest rates putting pressure on mortgage borrowers. The 30+ day delinquency rate for prime RMBS was
Via the AFR: Small business says it is facing a credit crunch and is blaming the royal commission into financial services for causing nervous banks to slow lending to the self-employed. The moderation in lending to small firms in recent months appears to be an unintended consequence of anecdotal evidence of questionable bank lending practices
Via Westpac: APRA’s approach to housing pays off The macroprudential approach to easing credit growth while not spurring a shock to the housing market has “pleasantly surprised” regulators. This is the assessment of JP Morgan chief economist Sally Auld. Speaking on a panel at the Breakfast with the Economists in Sydney on Friday. Auld joined
As the Hayne Royal Commission prepares its interim report, the panic is growing. Citi expects Hayne to expose “systemic over-lending”: In our view the most material conclusion of the commission is likely to be that the lending process presently isn’t sufficiently responsible. Responses to this issue are likely to involve increased due diligence which will
Via The Australian: NAB boss Andrew Thorburn faces a pay cut of about $1 million as the bank reduces executive bonuses, amid a campaign to regain public trust following damaging royal commission hearings. …“Where NAB falls short of customer, shareholder and community expectations, the new framework provides the board with the ability to hold leaders
Via S&P: Australian prime home loan arrears rose year on year in July but remained unchanged month on month, according to a recently published report from S&P Global Ratings. The Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages, which has been steady at 1.38% since May, was up from 1.17% a year earlier.
Excellent stuff from Damien Boey at Credit Suisse today: Has Assistant Governor Kent discovered religion? No. RBA Assistant Governor Kent has just delivered a speech on money creation. The primary purpose of his speech is to dispel the myth that the growing gap between bank loan growth and deposit growth explains or predicts the rise
