BFCSA Blog

Banking royal commission: executives off the hook, say unions The Australian 12:00am February 5, 2019 Elias Visontay   Unions leaders have lashed out at the royal commission report, saying it lets bank executives off the hook. ACTU president Michele O’Neil said: “The report is wholly inadequate and fails to get to the core of the issues in the banking sector and the insatiable greed of the banks, and lets those responsible — the bank executives — off the hook.” In a video posted to Twitter, the ACTU said the report failed to deliver justice because it lacked “direct referral of any criminal prosecution or civil prosecutions”. The union also said the report was a failure for not recommending to “kick banks out of super”, and “does nothing to change the sales-driven culture in banks”. “If a working person stole from their employer, the police would be called and they’d lose their...

James Kirby: Risk of bad behaviour by banks by no means eliminated after royal commission The Australian 6:52pm February 4, 2019 James Kirby   Has the Hayne report offered a future where the financial advice scandals of the recent past might not happen again? Answer: Probably. The report has zoned in hard on three areas — ‘fees for no service’, commissions — especially in the insurance sector and a ‘coherent’ system of discipline for financial advisers. If fully taken up by the government, Hayne’s recommendations should cut out the vast bulk of bad behaviour in these sectors. But in leaving the banks to continue in the business of ‘vertical integration’ — where they try to be ‘one-stop shops’ — the risk of bad behaviour has by no means been eliminated. Hayne has offered clean cut solutions to troubled dimensions of the system which have triggered the greatest anger such as charging...

Banking royal commission: hands-off Hayne relying on Treasury submission The Australian 12:00am February 5, 2019 Joyce Moullakis   For all the discussion about banks being reluctant to lend and the ­impact on the economy, Kenneth Hayne didn’t have a lot to say on the topic. In his final report, Hayne said banks were screening loan customers more heavily, which could result in a “tightening of credit”. He said that was a result of banks meeting their legal obligations. Hayne is relying on Treasury’s submission, which pointed to the housing market and economy being able to absorb stricter bank lending criteria. Banks will be ­relieved Hayne took a hands-off approach and that they escaped further rules or a clamp-down. That is especially important given the slowing of the $1.7 trillion mortgage market, with house ­prices coming off the boil across most capital cities. Hayne’s scrutiny of bank legal obligations has already prompted...

APRA nobbled as ASIC takes charge The Australian 12:00am February 5, 2019 Richard Gluyas   The prudential watchdog APRA, which emerged from the financial crisis as a renowned financial regulator, has had its powers and influence nobbled in a comprehensive review of the “twin peaks” regulatory model by the financial services royal commission. While commissioner Kenneth Hayne recommended retention of twin peaks, the model will now be extended into superannuation, with the Australian Prudential Regulation Authority to relinquish responsibility for industry misconduct to a resurgent ASIC. The Australian Securities & Investments Commission will also jointly administer the Banking Executive Accountability Regime, which will be broadened to apply not just to banking but to all APRA-regulated entities. Mr Hayne, who pilloried both ASIC and APRA in his September interim report for their soft regulatory touch and reluctance to pursue court action, explained the new approach to super regulation by saying each agency...

Banking royal commission: investors will break out the Moet over modest recommendations The Australian 12:00am February 5, 2019 Adam Creighton   Banks’ and fund managers’ share prices may well surge today, as the modesty of the final report dawns on investors and financial executives alike. Bottle shops in Sydney’s and Melbourne’s east would be well advised to stock up on Moet. The 76 recommendations — pricey, at more than $13 million a pop given the $1 billion-plus cost of the whole exercise — amount to little more than a vigorous spring clean of the financial sector. These are sensible but modest reforms, many of which had been in the pipeline for some time. While welcome, the changes fall short of what the public might have expected, given the volume and variety of the illegality and amorality unearthed last year, and the public attention it received. No criminal referrals were made. There...

Banking royal commission's final report is a dud. No wonder stock futures rose. Australian Financial ReviewFeb 5, 2019 6:22 AM David Fickling David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies.   The fearsome beast that's menaced Australia's financial services industry for the past year turns out to have been a paper tiger. The final report of the country's Royal Commission into misconduct in the sector will be a relief for bank investors. Futures on the S&P/ASX 200 index - the only immediate way to take a wager on the news, given the report's release after equity markets closed - immediately jumped as much as 0.3 per cent. When you consider that the companies under scrutiny make up only around a quarter of the benchmark, that's significant. To be sure, there are significant reforms embedded in Commissioner Kenneth Hayne's 76 recommendations, which the government...

Banking royal commission: Industry reacts to the final report Australian Financial Review Feb 4, 2019 7:27 PM John Kehoe, James Eyers   Bankers and big business leaders have acknowledged the need to improve conduct in the finance industry following the royal commission's final report, but mortgage brokers and the property sector warned cracking down on brokers could restrict credit flow. Banks were relieved commissioner Kenneth Hayne recommended not to extend the consumer responsible lending laws to small business, a measure bankers and the government feared could have worsened the credit squeeze. Commonwealth Bank of Australia, the country's largest home lender, said it noted the commission had found its conduct in relation to superannuation and other areas would "warrant further investigation by relevant regulators" and that CBA would co-operate. "The royal commission has been a thorough and valuable process for everyone – bank customers, financial services institutions, regulators and policymakers," CBA chief...

Banking royal commission final report: Criminal referrals will shame finance sector Australian Financial Review Feb 3, 2019 — 11:45 PM The AFR View (editorial)   Kenneth Hayne has done a powerful job in sharply clarifying the legal duties that financial service providers owe their customers and that identified breaches of those duties – such as charging people for perhaps a billion dollars or so of services they never received amid their insurance, superannuation or financial advice – should be more vigorously penalised. "There is no doubt that money was taken from clients," concludes Commissioner Hayne. "Nor is there any basis for doubting that, when taken, the taker did not intend to return it to the client". There can be no argument with the basic proposition that the professional duty to customers should form the bedrock of the business of providing banking and financial services. Commissioner Hayne's recommended 24 referrals for prosecution...

Business heavy-hitters warn against panic over Hayne Sydney Morning Herald 4 February 2019 12:01am Sarah Danckert, Clancy Yeates   EXCLUSIVE  Business leaders have warned it would be impossible to remove all risk from the banking sector and trying to do so would hurt the economy, as the Federal Government is set to release the findings and its response to the final report of the Hayne banking royal commission. Calling for calm ahead of Monday's release, former Reserve Bank Board members and financial regulators have also cautioned all sides of politics from turning the final report into a point scoring exercise and to be sensible in their response or risk the economic consequences. Amid concerns of a panicked response from government, former RBA board member and long-time Woolworths managing director Roger Corbett said clamping down on risk-taking by banks could have economic consequences. “Whilst I think there has been some inexcusable pieces...

Banks brace for hammering over their ‘woeful’ behaviour The Australian 12:00am February 4, 2019 Michael Roddan, Richard Gluyas   EXCLUSIVE  Australia’s banks are bracing for the biggest overhaul of their operations in generations, with royal commissioner Kenneth Hayne’s report into financial industry misconduct expected today to ­propose civil and criminal prosecutions for rogue companies and executives and tougher watchdog oversight. Leading corporate titans have called for an overhaul of conflicted remuneration, clearer and more enforceable laws, and a commitment to take responsibility for misconduct. “Agencies like ASIC will have to enforce the law, and the industry will have to adapt to compliance on a genuine basis — not compliance for the sake of it,” AMP chairman David Murray told The Australian ahead of the royal commission report being released at 4.10pm. “If it’s a good report, it will be clear to everyone what they have to do.” Former Bendigo Bank chief...

Top law firm questions Kenneth Hayne's ability to judge 'community standards' Australian Financial Review 03 Feb 2019 11:00 PM Michael Pelly   A leading law firm has questioned whether Commissioner Ken Hayne is qualified to fulfil a key part of his brief – assessing whether the conduct of the financial services sector has "fallen below community expectations". Allens has told its clients Hayne is "extremely well placed" to adjudicate on breaches of the law, but doubts his credentials when it comes assessing the required standard of behaviour. The latest edition of its newsletter Unravelled, sent out on Friday afternoon, also asks whether community standards or expectations are "an appropriate benchmark". The author, partner Michelle Levy, says it will "be a matter of speculation in most cases and irrelevant in others". Mr Hayne made pointed comments about the culture of the banks in his interim report, released in September. The former High...

I’m in Awe of How Fast the Housing Markets in Sydney & Melbourne Are Coming Unglued Wolf Street Feb 1, 2019 Wolf Richter   “Can we still describe this as an orderly slowdown in housing conditions?” mused CoreLogic Asia Pacific’s head of research Tim Lawless about the Australian housing market today. Over the last three months, the index for Sydney dropped 4.5%, and the index for Melbourne 4.0%, the “largest rolling quarterly fall since at least the 80’s.” Across the metro area of Sydney, prices of all types of homes combined, according to CoreLogic’s Daily Home Value Index, fell 1.35% in January from December, the third month in a row with a monthly decline of over 1%. The 4.5% decline over the past three months pencils out to an annual rate of decline of 17%. The index is now down about 12% from its peak in July 2017. Note the accelerating...

Shorting the big four banks: widow-maker no more? Australian Financial Review 03 Feb 2019 11:00 PM Jonathan Shapiro   After years of trying and failing to make money from an apparent housing bubble, betting against Australia's profitable big four banks has been dubbed the "widow-maker" trade. But the 2018 vintage of big bank bears fared well, and that has lured more hedge funds into believing the "widow-maker" will be a "money-spinner" in 2019. That is borne out by data complied by Macquarie analysts, which showed institutional investors had doubled their big bank shorts ahead of Monday's release of the Hayne royal commission final report. Whatever the report delivers, the bears see plenty of reasons to bet against the banks and a host of retailers that suffer if the property correction lasts through 2019. And with the big banks still trading at premiums to their global peers, and certain retail-exposed stocks priced...

Banks pull back on advertising, weathering the royal commission storm Australian Financial Review 01 Feb 2019 4:40 PM Max Mason   Australian bank spending on advertising has become the latest scalp of the Hayne royal commission, dulling what was a record year for media agency spend – but a campaign to rebuild public trust could see the financial services sector advertise more this year. Standard Media Index figures, which measure media agency spending, show that after massive increases in advertising in the first three quarters of 2018, spending by domestic banks, largely the big four, fell off a cliff in the final three months of the year. With the top brass from the Commonwealth Bank of Australia, National Australia Bank, Westpac and ANZ in the witness box in the final months of last year, financial services tightened advertising budgets as they weathered the storm of public outrage. In the fourth quarter...

'The longer I hold, the more I lose': FONGO takes hold of home sellers Sydney Morning Herald 1 February 2019 2:58pm Nick Bonyhady, Sumeyya Ilanbey   After 10 years investing in the property Andres Vargas has keenly felt the market's sharp turn in the last 18 months. He sold one house near Mt Druitt for a tidy profit last year and has now decided to sell his remaining Sydney investment in Green Valley, west of Liverpool. "I got it valued at $619,000 by the bank when I was applying for my home loan a year and a half ago," Mr Vargas said. "I've now seen similar properties going up for sale for $540,000, so there is a clear 10 per cent drop there alone. "It's quite scary. The longer I hold onto it, the more I'm losing." Welcome to the world of FONGO (fear of not getting out) for property vendors,...

Lenders tempt fixed terms borrowers with more rate cuts and cash offers Australian Financial Review 01 Feb 2019 5:25 PM Duncan Hughes   Lenders are chopping rates for fixed-term mortgages to tempt new borrowers in an intensifying battle to increase revenues and profits, despite deteriorating property market conditions. But short-term funding pressures mean lenders continue to hike variable rates. ME Bank has followed recent variable rate rises by NAB and ING to increase variable rates for existing customers by 18 basis points, while it will lift variable rates for new customers by 8 basis points. ME hiked variable rates by 10 basis points last month. ING, the nation's fifth largest home loan lender, this week announced its third round of rate rises in seven months. The margin between the rates for a three-year fixed home loan and an average standard variable loan has increased from 29 basis points to 39 basis...

Latest property price figures unwelcome news as auction market kicks back into gear Australian Financial Review 01 Feb 2019 5:27 PM Ingrid Fuary-Wagner   The country's auction market will kick back into action this weekend after a summer hiatus but it coincides with more unwelcome news for homeowners who were hoping to see the back of the property downturn in 2019. About 500 homes are scheduled to go under the hammer across Australia but sale results are expected to remain lacklustre in February and beyond with the housing slump gaining momentum at the start of this year. Price falls in Sydney and Melbourne accelerated over the past three months, with dwelling values down 4.5 per cent and 4 per cent respectively and dropping 1.3 per cent and 1.6 per cent over January alone, according to CoreLogic's home value index. The downturn, which had centred primarily around Sydney and Melbourne, is also...

Banking royal commission: Regtech software a pathway for post-Hayne compliance Australian Financial Review 01 Feb 2019 2:30 PM James Eyers   The rise of regulatory technology to help banks comply with the rules seems inevitable: it's beyond human capacity to keep abreast of every global financial services law and regulation. But ironically, the Hayne royal commission appears to have made banks more risk-averse and reluctant to embrace new systems, even though it has become clear their past practices have fallen short. Regtech entrepreneurs hope board directors will be the drivers of new solutions; after all, the buck stops with them to know what's going on. Their first hurdle will be weaning boards off their long-running relationships with major global technology vendors such as IBM, or the big four consultancy firms, even though they failed to steer banks away from the regulatory mire. But the start-ups are up for the challenge. Over...

APRA ‘ignored’ CBA offences The Australian 12:00am February 2, 2019 Ben Butler   EXCLUSIVE  The prudential regulator made no effort to prosecute the Commonwealth Bank over more than 15,000 criminal breaches of superannuation law admitted to by the bank, The Weekend Australian can reveal. Evidence before the financial services royal commission at hearings in August showed that the CBA subsidiary, Colonial First State, failed to move 15,000 customers who had not made a choice about where their superannuation should go into a low-fee MySuper account, as required by law. But instead of prosecuting CBA over the breaches, which could have resulted in a fine of up to $127 million, the Australian Prudential Regulation Authority ­accepted a plan that allowed the bank to gradually transfer members over three years, during which time it was able to continue charging the higher fees. In response to a Freedom of ­Information request from The Weekend...

Financial Sector Union gets access to banking royal commission lockup The Australian 8:03pm February 1, 2019 Michael Roddan   EXCLUSIVE  The Financial Sector Union representing frontline workers in bank branches and superannuation companies has been granted admission to the royal commission lock-up after being knocked back in an eleventh-hour misunderstanding between the union and Treasury. The Australian Bankers Association, representing the interests of the major lenders, the Financial Services Council, the lobby groups for the wealth management industry, and the Australian Institute of Superannuation Trustees will all been given access to Commissioner Kenneth Hayne’s final report hours before it is publicly released on Monday. While the nation’s major media organisations have also been granted access to a federal budget-style lock-up to read the documents before they are published on Monday afternoon, the union group representing bank workers claimed it had been knocked back from attending. After the FSU’ s lawyers applied...