A new note from Westpac makes it clear today that although interest rate cuts have so far failed to generate much economic return in traditionally sensitive sectors, they are at least reducing arrears at a good clip. This is good news. Any renewed downwards momentum in property prices will have to come from rising unemployment.
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.
Former Future Fund chairman and CBA CEO David Murray has given everyone a post-GFC caning this afternoon: “Governments in Europe an the US have not faced up to structural reform and fiscal discipline as they should have and that’s raised the questions of what is the role of the central bank. If central banks think these [quantitative
The emerging debate about bank funding is heating up. The big splash by the Australian Centre for Financial Studies and its Funding the Future project has set things off but NAB wades in today: A senior National Australia Bank executive says global requirements to hold more capital mean banks may not have the funds needed
Citi asks the question today: How will bank dividends hold up during the Australian rebalancing? Their answer is positive. From our base case – which forecasts the sector delivering EPS growth of ~ 4% in FY14/FY15 — Our base case over the next two years assumes i) an economy in transition from the resource capex
Here is how Wikipedia defines rent-seeking: In public choice theory, rent-seeking is an attempt to obtain economic rent by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth. One example is spending money on political lobbying in order to be given a share of wealth that has already been created. A famous example
The Australian picks up a useful story today on the move by the Bank of International Settlements on the use of internal risk weighting asset models to lower capital reserves. Long term readers will know that this is the dirty little secret at the heart of Australian banks’ ability to stretch their leverage. THE banks’
Cross-posted from The Conversation In October 2008, at the height of the Global Financial Crisis (GFC), the federal government decided to guarantee bank deposits. The ‘financial claims scheme‘ (FCS), was an emergency measure to protect the banking system. Initially, deposits up to $1m at ‘authorised deposit-taking institutions’ (ADIs) were insured by the government at no
It’s never been formerly announced but it’s been commented on repeatedly by bankers that for the past few years APRA has insisted that major banks match new deposits to loans on a one-to-one basis. This move has helped shift bank liquidity profiles away from the wholesale funding dependence that has repeatedly caused funding cost spikes
Chinese seven day repo markets have eased again today, to 6.5% at last count: Australia’s major banks, however, continue to see their CDS spreads rise, up to 132 bps yesterday, the highest since October last year. Updated And just to illustrate the perils of reporting dynamic markets, China 7-day repo is now at 10%.
From Banking Day: Bluestone is getting back into non-conforming lending five years after suspending new loans from its cornerstone product range. …Peter Wood, general manager of asset management for Bluestone, said the firm researched the market for more than a year to work out its options for resuming lending.”We found some niche pockets that were
From Banking Day: Sean Keane, of Triple T Consulting, wrote in his bulletin for Credit Suisse on Friday that “it has become very noticeable in recent days that the level of enquiry about the risk to Australian bank funding has substantially increased.” “Given the geographic dispersion of the source of these enquiries there is little
From Fitch just now: Fitch Ratings-Sydney-19 June 2013: Fitch’s Dinkum Index, which records 30+ days delinquencies in the Australian prime RMBS sector, remained largely stable in a low interest rate environment, with 30+ days arrears increasing by 2bp to 1.48%. Q113 saw 30-59 and 60-89 days arrears increase by 4 and 3bp respectively, while 90+
A couple of stories today raise questions about the possible transmission of a mining bust into bad loans for banks. At the AFR, the news is good: The head of business banking at National Australia Bank, Joseph Healy, says a slowdown in the mining sector is yet to trigger an increase in bad debts. Mr
By Leith van Onselen Macquarie bank has called an end to the Big Four Aussie banks’ yield driven rally following expectations that the US Federal Reserve will reduce its quantitative easing program. From Interest.co.nz: …with financial markets undergoing a shift as investors speculate on the Fed tapering off its QE programme, the Macquarie analysts note
From the AFR this morning comes a new headache for the major banks: Australia’s big banks are vigorously fighting a new regulation for derivatives proposed by international financial regulators that would add hundreds of millions of dollars to their funding costs and may lead to higher interest rates being passed on to consumer and business
The usually sound Jonathon Shapiro at the AFR, today does a royal gloss job on the history of Australian shadow banking: The term “shadow banking” is being uttered with increased frequency by politicians and central bankers as they sound warnings about the next big scourge on the stability of the financial system. Clearly, there’s a dark
From Moody’s this morning come news of a possible downgrade for Australian banks in what looks to be blow back from Europe and Cyprus in particular. While it does not have an immediate direct impact on bank creditors one wonders how long senior unsecured debt holders, who are subordinated to both deposits less than $250,000 and
By Leith van Onselen Last year, The Australian newspaper published some great articles questioning the commonly held view that Australia’s banking sector is conservative. In April 2012, The Australian uncovered how Australia’s largest banks were being forced to forgive mortgage debts of borrowers granted loans based on falsified or fraudulent information supplied by mortgage brokers.
By Leith van Onselen Late last year, the Reserve Bank of Australia (RBA) released a paper examining the macro-prudential policy actions by in 57 economies over the past 30 years against time series data on housing prices, rent, housing credit and interest rates. The paper found that macro-prudential policy tools, such as caps on loan-to-value
The Australian has an interesting snippet today: In recent weeks, global investors have been gradually repatriating funds from the local stockmarket as the dollar cools against the US dollar and Japanese yen, with the banks a key target after their 20 per cent outperformance against the broader market in the past year. A rally in
CBA is out with it quarterly update this morning and although the result is in line it is not glowing. From Credit Suisse: Cash earnings of circa $1.9bn (Credit Suisse 2H13E run-rate $1.914bn; consensus $1.900bn); Reported Profit circa $1.9bn Revenues: 1) CBA stated that trading income 3Q13 “was at a level consistent with the 1H13 run-rate”;
From Fitch: Recent results at the four big banks were strong, and such consistent earnings are one of the sector’s key rating strengths. Such earnings performance, together with surplus capital and conservative loan provisions, provide substantial buffers to absorb pressure on earnings in a modest downturn – which is already factored into our ratings. The operating
In a good piece at the AFR this morning, Chris Joye challenges the RBA’s current approach to monetary policy by comparing it with that of New Zealand: The RBNZ is actively selling Kiwis in the foreign exchange markets and buying foreign currency while refusing to cut its cash rate beyond the current 2.5 per cent level,
From our second RBA today comes the news that they’ve added on 2 basis points to the RBA cut: ANZ May 2013 Interest Rate Review – Reduces variable mortgage rate by 0.27%pa – ANZ today announced it will lower interest rates for variable rate mortgages by 0.27%pa following its monthly interest rate review. Effective Friday
By Leith van Onselen Fitch Ratings agency has today warned Australia’s banks that that they need to improve their funding mix if they are to meet Basel III liquidity requirements and retain their coveted AA- credit ratings: Fitch Ratings-Sydney/Singapore/London-09 May 2013: Australian banks need to continue to improve their funding mix to meet Basel III
It’s very much worth watching how the RBNZ’s new macroprudential policies roll out given the increasing likelihood that they’ll end up over here as well. Banking Day reports that the banks have begun their fight against the new regime: Economists said the changes would have only a small immediate effect on interest rates for high LVR