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.

1

Murray review a boon for smaller banks?

By Leith van Onselen The head of Suncorp, Patrick Snowball, has claimed that the recommendations of the Murray Financial System Inquiry are likely to make it much easier for smaller authorised deposit-taking instritutions (ADIs) to compete against the Big Four banks. From The Australian: “The inquiry has fuelled a robust level of discussion and debate

67

Risk on, as interest only mortgages hit record

By Leith van Onselen APRA just released their quarterly data on housing exposures, which captures Authorised Deposit-Taking Institutions (ADIs) loans to the housing sector for the September quarter of 2014. According to APRA, ADIs’ total domestic housing loans were $1.3 trillion, an increase of $103.4 billion (9.0%) over the year to September, with the value

8

Fitch: Aussie banks will need to raise capital

By Leith van Onselen Global credit ratings agency, Fitch, has labelled Australia’s big four banks’ capital profiles as “about average” and claimed that they could be forced to increase their capital buffers by up to $53 billion – equivalent to nearly two year’s combined profits – if the Murray financial system inquiry takes aggressive action

66

Last stand of a dying economic model

The AFR is reporting that: Australia’s big four banks are tipped to raise $134 billion from wholesale markets this financial year, the most since 2009-10, as lenders use cheaper global funds to fuel domestic competition. …The last time banks raised this much wholesale money was in financial 2010, when the government was guaranteeing bank borrowings

17

Aussie banks ill-prepared for property crash

By Leith van Onselen Australia’s big four banks are ill-prepared for a housing crisis, according to AMP Capital’s head of credit markets, Jeff Brunton, who claims that official stress tests failed to account for the impact on mortgages that did not default. He takes up the argument pioneered at MB by Deep T, from The Canberra

21

The bank capital mirage

By Leith van Onselen The AFR’s Chris Joye has been on fire recently, systematically tearing apart the myth that Australia’s banks are “well-capitalised” and “safe”. In today’s AFR column, Joye has taken on APRA’s new boss, Wayne Byres, and showed that in contrast to APRA’s claims that an increase in the home loan share of

37

So you think our banks are “safe”?

By Leith van Onselen The AFR’s Chris Joye has continued his crusade against the Big Four banks flimsy capital buffers, revealing over the weekend that Australia’s four major banks had all the capital assigned to their $1.25 trillion home loan books completely wiped out in APRA’s recent stress-tests. According to Joye’s weekend report, the majors

5

The banker that embraced macroprudential

This is not the first time I’ve praised Bendigo and Adelaide Bank chief Mike Hirst. From the AFR: “The global economy is just limping along and the G20 [leaders summit] is addressing that. Because we’re in that situation, however, a few countries have taken a new approach through quantitative easing, for example,” Mr Hirst said. “Given

2

S&P downgrades Genworth

From S&P: Genworth Financial Mortgage Insurance Pty Ltd. Ratings Lowered; Outlook Negative Overview · S&P has lowered the financial strength ratings on Genworth Life Insurance Co., Genworth Life and Annuity Insurance Co. and Genworth Life Insurance Co. of New York to ‘BBB+’ from ‘A-‘. · As a result, the financial strength ratings on Genworth Financial Mortgage Insurance

6

Australia’s perverse RMBS renaissance

The RBA Chris Aylmer delivered a speech today on the recovering RMBS market. It is worth  a look: Introduction Thank you for giving me the opportunity to speak here today. My remarks are in two parts. The first part scans recent developments in the securitisation market. In the second part, I will discuss the role of

20

Too big to fail and the push for bank bail-ins

Cross-posted from The Conversation: In the last decade or so, the global financial landscape has endured two major shocks – the first with the 2007 collapse of the sub-prime mortgage market in the United States, and the second emanating out of Europe, with a major loss of confidence in the quality of debt issued by

46

A leash is being thrown over the Australian mortgage monster

This post is long but you must read it. The Australian economy faces a potential decades long turning point on events that transpired late Friday. The following speech was delivered by Chairman Australian Prudential Regulation Authority Wayne Byers. Good afternoon. Let me start by posing a question: are Australian banks adequately capitalised? That’s a pretty

52

APRA skeptical after bank stress tests

This is better, from the AFR, comes Wayne Byers, chairman of APRA: “If we draw one conclusion from the stress test this year, it’s that there remains more to do to be able to confidently deliver strength in adversity,” he said. With surging house prices in Sydney and Melbourne… Mr Byres said the low risk

2

ASIC Updates Responsible Lending Guidance

  By Martin North, cross-posted from the Digital Finance Analytics Blog: ASIC has updated its guidance for credit licensees on their responsible lending obligations. Credit licensees cannot rely solely on benchmark living expense figures rather than taking separate steps to inquire into borrowers’ actual living expenses. The updated guidance reflects: a recent Federal Court decision

13

APRA Releases Final Mortgage Lending Guidance

By Martin North, cross-posted from the Digital Finance Analytics Blog Following its earlier draft, APRA today released a final prudential practice guide for authorised deposit-taking institutions (ADIs) on sound risk management practices for residential mortgage lending. Prudential Practice Guide APG 223 Residential mortgage lending (APG 223) provides guidance to ADIs on addressing housing credit risk

2

There is no mortgage price war

I am repeatedly seeing media articles describing a mortgage price war by selectively quoting from interest rate aggregation sites and extrapolating that to the whole system. There is a much easier and more accurate way to track real lending rates. The RBA provides a monthly updated data series called “Indicator Lending Rates” that averages the

15

So cut your dividends, then, sheesh

The bankers like to wave this threat don’t they, from The Australian: Handing down a record $7.6 billion cash profit, Mrs Kelly yesterday joined her banking CEO counterparts in urging the Murray financial system inquiry to consider the cost of forcing the big banks to increase capital levels. She also threw support behind comments by ANZ

19

More macroprudential bank denial

First it was Bill Evans at Westpac, now it’s his CEO, Gail Kelly, at Fairfax: Mrs Kelly joined the industry chorus warning that those regulators had to be mindful of the trade off between stability of the system and growth – in profits and lending and the economy. She also weighed into the potential for

6

From millionaire to bubble factory

From Banking Day: The rapid growth of Macquarie Group’s Australian mortgage business prompted a series of questions from analysts at an investor briefing on Friday, when Macquarie presented its results for the September half.Over the six months to September Macquarie’s mortgage book grew by more than 16 per cent to A$19.8 billion. …Macquarie’s head of

20

ANZ perpetuates bank capital myths

By Leith van Onselen ANZ Chief, Mike Smith, has once again warned that Australia’s Big Four banks risk becoming globally uncompetitive if they are required to raise capital levels to withstand external shocks. From The Canberra Times: In a market briefing on Friday, Mr Smith argued Australian banks were already well capitalised compared with peers.

44

Bankers do the crime but not the time!

Cross-posted from The Conversation: Recently, the head of the Australian Securities and Investments Commission, Greg Medcraft, called Australia a “paradise” for white-collar criminals. Soon after he recanted, claiming he didn’t want the country to become a haven for financial fraudsters. This rephrasing likely followed when Finance Minister Mathias Cormann leaned on Medcraft. The mass media

16

Strip the banks of invisopower

Crikey’s Glenn Dyer and Bernard Keane appear to have turned over a new bearish leaf recently (thank goodness) and today’s missive is an example of the dividend: Australian banks escaped the global financial crisis, so they say, but in reality the Australian financial system, and the big four especially, were bailed out by the Reserve Bank

29

The great Australian banking myth

By Leith van Onselen The Drum’s editor, Ian Verrender, has produced a great article slamming the banks’ vocal opposition to stricter capital rules and debunking the claim that Australia’s banked were not bailed-out during the GFC: Within days [of Lehman Brothers’ collapse], the government shored up offshore Australian bank debt with a taxpayer guarantee… And