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.

28

Mortgage brokers roll Recessionberg

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.

13

Labor commits to all but one Hayne recommendations

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

34

UBS: Credit crunch to intensify

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

10

UBS: Banks won’t pass on rate cuts

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

17

ASIC lines up money laundering CBA executives

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

17

CLSA: Suncorp mortgage bond failure ‘a canary’

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

26

ASIC takes aim at dodgy mortgage lending

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

16

Westpac: Mortgage arrears rising across Australia

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

6

Labor to slug banks $640m for new “fairness” levy

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.

34

Dodgy lending class action “will not be the last”

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

48

Westpac hit with class action over ‘irresponsible’ mortgages

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

14

90-day mortgage arrears hit record high

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 

8

Pussy Labor prepares to roll on broker reform

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

9

Mortgage broker locusts swarm politicians

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

2

Voters trust Bowen over Frydenberg on Hayne

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

14

Labor’s banker smash fires up ASIC

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

16

Consumer groups slam mortgage broker forum

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.

14

ASIC prepares for HEM 2.0

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.