BFCSA Blog

$2m compo fair for ‘worst loss’: Shorten The Australian 12:00am February 22, 2019 Simon Benson   EXCLUSIVE  Financial institutions could be forced to pay up to $2 million in punitive damages to customers who have been humiliated, stressed or inconvenienced by a bank’s behaviour under a supercharged compensation scheme that will form a key plank of Labor’s formal response to the banking royal commission. Bill Shorten will announce today the dramatic increase to the compensation scheme for non-financi­al loss claims by consumers, which are currently limited to just $5000. The cap on financial credit-based claims against banks by consumers would be $2m under the Australian Financial Complaints Authority, quadrupling the current $500,000. The maximum claims for small businesses who allege losses at the hands of bank misconduct would double to $1m. The scheme would be retrospective and would allow AFCA to hear unresolved claims back to ­January 1, 2008. The most...

'Hockey owes me': Former Helloworld manager dials in to put heat on envoy Australian Financial Review Feb 21, 2019 5.49pm Andrew Tillett   Scott Morrison is digging in behind Joe Hockey despite claims aired in Parliament that a wealthy Liberal Party donor and travel company boss secured a meeting at short notice between one of his executives and the Ambassador to the US because "Hockey owes me". The controversy over senior Liberals' links to the Helloworld travel company and its chief executive Andrew Burnes has deepened after a former company manager, Russell Carstensen, told the Senate's foreign affairs committee he was dispatched to Washington DC after Mr Hockey had expressed his "frustrations" to Mr Burnes about the embassy's "unprofessional" travel arrangements. Mr Carstensen said he later learnt Department of Foreign Affairs and Trade staff were "uncomfortable" he met with Mr Hockey, who is one of Helloworld's biggest shareholders, owning more than...

Federal Government slammed for stacking Administrative Appeals Tribunal with 'Liberal mates' ABC News22 February 2019 Jade Macmillan   The Federal Government has defended its latest appointments to the Administrative Appeals Tribunal (AAT), amid accusations it has been stacked with "Liberal mates". Attorney-General Christian Porter announced 34 new appointments to the tribunal, including former Senate president Stephen Parry, who resigned from Parliament last year after confirming he was a dual citizen. He was appointed on a part-time basis along with former federal Liberal MP Robert Baldwin and former Nationals minister De-Anne Kelly. Former state Liberals MPs — Michael Sutherland and Joe Francis from Western Australia and Steven Griffiths from South Australia — were given full-time positions along with former federal Labor MP David Cox. Shadow Attorney-General Mark Dreyfus said the number of Coalition figures, including former staffers, was "extraordinary". "This Liberal Government seems to think that public positions are just theirs to...

KPMG report to Home Affairs Department flagged risks with Paladin Australian Financial Review Feb 21, 2019 10.00pm Edmund Tadros, Lisa Murray, Angus Grigg, Jonathan Shapiro   Consulting giant KPMG raised concerns about the financial position of Paladin – the little-known company contracted for $423 million to provide services to refugees on Manus Island – in a report to the Department of Home Affairs, contradicting evidence given by senior officials this week. KPMG, which refused to comment on the contents of the report, is understood to have flagged risks around Paladin's financials in the assessment. During a Senate estimates hearing on Monday, Home Affairs officials said KPMG did not "identify any significant issues that were drawn to" the department's attention about Paladin. Paladin broke its silence on Thursday, denying it had any bad debts and insisting it did not make payments that are not linked to a service. A KPMG spokeswoman said...

Inferior support beams led to cracking of Opal The Australian 12:00am February 22, 2019 Elias Visontay   Engineers investigating western Sydney’s Opal Tower have found key horizontal support beams built to an inferior, non-compliant strength were the chief cause among a slew of other deficiencies that triggered major cracking and two evacuations of the troubled building. Handing down their final ­report after almost two months of the multi-party investigation, engineers engaged by the government also slammed structural engineers who provided the ­detailed technical design for the building’s construction of the project for lacking transparency and accountability. Another significant error of the tower was the decision to only partially grout — a process to seal and fill the space between surfaces — between the support beams and panels, which raised the stress the already non-compliant support beams were forced to carry and resulted in the most ­visible damage at the site. The...

The corporate regulator's 'litigate first' strategy faces a big hurdle Australian Financial Review Feb 21, 2019 11.00pm Michael Pelly   The corporate regulator faces big hurdles to its "litigate first" strategy because of a definition of dishonesty that has been rejected by the High Court and never used successfully in a prosecution. Australia Securities and Investments Commission deputy chairman Daniel Crennan revealed on Tuesday there were 25 active investigations flowing from case studies at the banking royal commission and the regulator was "less likely to engage in negotiated outcomes". ASIC has sought advice on a Hayne royal commission case from the Commonwealth Director of Public Prosecutions, which said Tuesday it expected an extra 25 briefs, some involving multiple defendants, over the next two years. But leading corporate lawyers said there needed to be a reality check on how far ASIC could respond to Commissioner Kenneth Hayne's challenge that it should take...

APRA to pursue super referrals The Australian 12:00am February 22, 2019 Michael Roddan   The prudential regulator will pursue 12 referrals of misconduct in the $2.8 trillion superannuation industry from Kenneth Hayne’s royal commission although there is no likelihood of civil or criminal penalties, as any potential guilty findings will allow the watchdog to use its ­directions power to overhaul rogue super funds. The Morrison government last week attached civil penalties to superannuation trustee breaches of directors’ covenants or obligations. However, it was not extended retrospectively, as Labor has proposed, amid concerns from Treasury that doing so would be a breach of human rights. The legislation also failed to be passed by the House of Representatives this week, so will now be unlikely to pass into law until April. While court action will not result in penalties, an adverse finding for a super fund could allow the Australian Prudential Regulation Authority...

  Don't blame us for falling house prices says APRA chairman Wayne Byres Australian Financial Review Feb 21, 2019 1.59pm James Eyers   The prudential regulator's intervention to cool bank lending to property investors is not to blame for steep house price declines, the Australian Prudential Regulation Authority chairman said. Wayne Byres told Senate estimates on Thursday that the falls were "probably inevitable...after such a sharp run up" and that he had not been surprised by the extent of them even though APRA hadn't modelled the impact its policy would have on prices. Such a task would be better conducted by Treasury, he said, but would have been very difficult given there are many drivers of prices. Housing prices have fallen by 12 per cent in Sydney and by 9 per cent in Melbourne from their peaks in 2017. After rising by almost 50 per cent over the five years to...

Cheap money 'bubbles' at risk of bursting Australian Financial Review Feb 21, 2019 2.48pm Sarah Turner   Cheap money has pushed companies such as US co-working space provider WeWork and ride-sharing firm Uber into bubble territory, but the conditions that fuelled their ascent are now reversing. That's the view of Chris Watling of Longview Economics. "WeWork should not be worth $US20 billion, Uber should not be worth $US120 billion. Tesla is a company that would not exist in the 1980s [when] there were proper bond vigilantes," he told the Portfolio Construction Forum markets summit 2019 in Sydney this week. "That is a bubble and I think that is starting to unwind," Mr Watling said. "You have to keep valuing things up or it doesn't work." A "trifecta of factors in the last few decades" has led to "serial bubble blowing", he added. Those factors include an unanchored international monetary system, central...

Joe Hockey lobbied for Helloworld: paper 5 hrs ago 20 February 2019   http://www.msn.com/en-au/news/australia/joe-hockey-lobbied-for-helloworld-paper/ar-BBTOVs7?ocid=ientp Australia's US ambassador, Joe Hockey has been dragged into the row involving travel services company Helloworld, in which he owns shares. Mr Hockey, a good friend of Liberal Party treasurer Andrew Burnes who manages the company, asked staff to meet a representative of the company in 2017, The Sydney Morning Herald and The Age report. Finance Minister Mathias Cormann on Tuesday had to defend a family holiday booked through the company in January 2018. The senator paid $2780 for the flights to Singapore after it was revealed on Tuesday he got the holiday for free. "The travel booked through Helloworld back in July 2017 was on commercial terms and should have been charged to my credit card straight away as instructed by me at the time," Senator Cormann said in a statement on Tuesday. "That is what...

And there’s the external shock to finish off housing Macro Business 12:21 am February 22, 2019 David Llewellyn-Smith   There it goes. The Australian property bubble is bursting and it is not going to be pretty. MB has previously posited an ultimate fall in house prices of about one third in real terms from respective city peaks over two price fall periods. That could translate to a 40% fall in real terms over the long term. The first leg was supposed to be 10-15% in short order and the second over the longer term similar as China structurally slowed one way or another. As of yesterday the second leg has been brought forward. The Australia/China relationship is in meltdown. Indeed, as mentioned earlier this week, it has degenerated so much that we might call it an “economic war”. Australia has banned and blocked Chinese interests in everything from politics to telecoms...

Forced End of “Ponzi-Like Leverage” & “Fraudulent Lending” Turns Australia’s House Price Bubble into “Property Bloodbath” Wolf Street Feb 20, 2019 Wolf Richter   As investors are fleeing Australia’s housing bust, sales of new houses have plunged to record lows, and home prices in the Sydney and Melbourne metros have dropped 12% and 9% from their respective peaks in mid and late 2017. Combined, the two metros account for about two-thirds of residential property value in Australia. A two-decade-long housing boom, interrupted by only a few minor dips, led to two of the most magnificent housing bubbles in the world, and they’re not “plateauing” or anything. The over-ripe bubble was pricked not by rising interest rates – the Reserve Bank of Australia’s policy rate remains at record low – but when bank regulators finally started to crack down on some of the bank-lending shenanigans required to inflate that kind of bubble,...

Home loan arrears at highest since 1996: S&P Sydney Morning Herald February 21, 2019 12.00am Clancy Yeates   The proportion of borrowers who are behind on their home loan payments has edged up to its highest level in more than two decades, with Queensland and Western Australia driving the rise. Figures from Standard & Poor's on Wednesday showed the share of home loans that were more than 90 days behind on their scheduled payments had risen to 0.75 per cent in December, up from 0.73 per cent in November, and 0.65 per cent in January 2018. Although still low in absolute terms, it was the highest level since the credit ratings agency began collecting the data in 1996. S&P credit analyst Erin Kitson said the proportion of home loans that were more than 90 days behind, known as being "in arrears", was still "quite low," but it had been creeping up...

Greens call for tripling of bank levy to raise $41 billion Sydney Morning Herald February 21, 2019 12.01am Shane Wright   EXCLUSIVE  The Greens want a threefold increase in the levy on the nation's big banks in a move it says would raise almost $10 billion over the next three years and help smaller institutions woo new customers. In a policy that the independent Parliamentary Budget Office assumes would be mostly paid for by customers and shareholders, the Greens are demanding the levy be increased to 0.05 per cent from its current level of 0.015 per cent. The levy, which is tax deductible for the banks, is expected to raise $1.65 billion this financial year. Under the Greens proposal, it would raise an additional $2.8 billion in its first year of operation before increasing to $3.4 billion. Over a decade, the higher levy would raise an extra $40.2 billion, according to...

‘Let the bloodbath begin’: House prices in Sydney and Melbourne ‘could halve’ in worst crash since 1890s news.com.au February 20, 2019 2:21pm Frank Chung   House prices in Sydney and Melbourne could fall by up to 25 per cent this year alone and “there’s a chance they could fall by half” in the coming “property bloodbath”, an economist has warned. LF Economics founder Lindsay David, who has been warning of the looming property crash for the past five years, said in a report today the recent house price falls were just the beginning. CoreLogic data for January showed Sydney and Melbourne prices were now 12.3 per cent and 8.7 per cent down from their respective peaks in July and November 2017, with Melbourne falling at “the fastest rate ever seen”. “We think there’s a chance property prices could fall by half in Sydney and Melbourne over the long run,” Mr David...

Foreign investment in Australian real estate collapses The New Daily 3:09pm, Feb 19, 2019 Isabelle Lane   Foreign investors have abandoned the Australian real estate market en masse, new figures reveal, with economists now forecasting steeper house price falls and a Reserve Bank interest rate cut. The value of approved purchases of Australian housing by overseas investors has collapsed since the property price bubble burst in 2017, new data from the Foreign Investment Review Board shows. Foreign investment plunged by 58 per cent year-on-year from $30 billion to $13 billion in the 2017/18 fiscal year – the lowest level in nearly a decade – FIRB found. The data shows foreign investor enthusiasm for Australian homes continuing to wane, following on from a 59 per cent plunge in foreign investment in 2016/17. The figures show foreign investment in real estate returning to pre-property price boom levels. Foreign investment in Australian property experienced...

The economy is at risk of a 'doozy recession', claims bear Gerard Minack Australian Financial Review Feb 20, 2019 10.50am Duncan Hughes   The economy is at risk of a "doozy recession" as the housing downturn accelerates at an "alarming pace" weakening consumer sentiment, warns former Morgan Stanley global strategist Gerard Minack. Mr Minack, who is known for calling the global financial crisis, said a recession would drive cash rates to zero, 10-year bond yields to 1 per cent and the Australian dollar to $US60 cents. The likelihood of a recession should become clear around the time of the May federal election, forcing economic management to the top of the political agenda. He claims it could bring forward the calling of the campaign if conditions deteriorated and could also lead to the RBA cutting cash rates before the election is called, he said. "It's ugly," said Mr Minack about the bear...

Treasury warns on housing downturn risks, backs go slow on mortgage brokers Australian Financial Review Feb 20, 2019 11.43am Matthew Cranston   Treasury Secretary Philip Gaetjens has warned that "falling house prices could also cause consumer spending to be weaker than forecast" and said "care must be taken" on mortgage broker reforms. Mr Gaetjens told an estimates committee that government needed to remain fiscally disciplined at a time where debt to GDP was now at 14.6 percent and risks were now falling house prices. "With new risks emerging it is vital that discipline be maintained," Mr Gaetjens said. "Falling house prices could also cause consumer spending to be weaker than forecast." Mr Gaetjens wouldn't give any view as to where Treasury's next forecasts were likely to land but said that "the downside risks appear to be more intensified" than they were at the mid-year budget update. "Central forecasts remain solid but...

  David Morgan on why Bob Joss left Westpac, and how a mega merger with CBA failed Australian Financial Review Feb 19, 2019 11.00pm Tony Boyd   EXCLUSIVE  Westpac Banking Corp and Commonwealth Bank of Australia came close to sealing a banking mega-merger in 1998 that would have meant David Murray being appointed chief executive of the combined group, according to an official biography of former Westpac CEO David Morgan. The deal would have created a "super-bank" with 38 per cent of all deposits. But it disintegrated over "social issues" when CBA's board insisted Morgan, who was head of Westpac's institutional bank, and Westpac's chief financial officer Pat Handley, not be allowed to remain as directors of the combined board. The biography, David Morgan – An Extraordinary Life, (Hardie Grant) is written by Oliver Brown, who was given unprecedented access to Morgan and all of his contemporaries in business and politics...

Senior bank executives facing criminal charges, ASIC warns The Australian 12:00am February 20, 2019 Michael Roddan   The corporate watchdog has flagged criminal prosecutions against senior bank executives from almost 40 investigations into alleged breaches as the government prepares to extend the time jilted customers can seek redress from banks back to 2008, the start of the global financial crisis. The Australian Securities & Investments Commission unveiled a 50 per cent increase in probes into Australia’s largest financial institutions over the past year as part of its formal response to the banking royal commission. The response, ahead of an appearance before Senate estimates today, revealed almost 40 investigations and reviews into alleged corporate and civil breaches were under way by ASIC, which had set up a “centralised’’ internal enforcement office in a bid to tackle rampant wrongdoing in the sector after it received a bruising at the hands of the inquiry...