BFCSA Blog

Hayne recommendations are a death blow for smaller brokers The Australian 12:00am February 8, 2019 Pauline Hanson Pauline Hanson is a senator for Queensland and leader of Pauline Hanson’s One Nation Party.  Commissioner Kenneth Hayne’s recommendations in his final report into misconduct in the banking industry have immediately jeopardised the survival of more than 17,000 small businesses across Australia. That’s the number of mortgage brokers who rely on upfront and trailing commissions paid by the lender to survive. Take those commissions away and make the mum and dad borrower pay, and you will decimate the industry. That’s tens of thousands of jobs, millions of dollars in tax revenue and much less competition for the big banks. The recommendations have also put in jeopardy more than 100 small lenders in Australia — lenders that have shifted into regional areas to partially fill the void left by the big banks moving out. Those...

Banking royal commission: two executives down, the rest lucky to keep their jobs The Australian 12:00am February 8, 2019 Adam Creighton   The rest of the nation’s bank chairmen and executives would have counted themselves lucky last night after they learned that National Australia Bank’s Ken Henry and Andrew Thorburn had been punted from two of the plushest gigs in corporate Australia. Indeed, they should be thankful that they still have their jobs, because if Thorburn and Henry had to go, then they all should have gone. A clean-out of the top echelons of the biggest banks was what the public deserved after the consistent poor behaviour unearthed by the royal commission. If the resignations of these two men, and a few other previously unknown executives last year, is the pointy end of the royal commission, then the latter has been an abject failure. Where is the structural reform? Thorburn earned...

NAB's Andrew Thorburn, Ken Henry resign, Phil Chronican named acting CEO Australian Financial Review Feb 7, 2019 7.36pm James Frost, Jonathan Shapiro, James Eyers   NAB's embattled chief executive Andrew Thorburn and chairman Ken Henry have capitulated to growing pressure and announced their resignations as the crisis of confidence swirling around the bank came to a head. The bank has tapped veteran banker Phil Chronican to replace Mr Thorburn from February 28 as acting chief executive, while Dr Henry will remain in his role until a new leader is found. The bank will also begin a clean-out of the board in the hope of rebooting the culture after a damaging period that saw the bank lurch from one crisis to the next. Mr Thorburn said it had been a tough week and over the last 24 hours he had come to a realisation that the time was right to leave. "I...

CBA has 'wasted a good crisis': Deutsche Australian Financial Review Feb 7, 2019 4.37pm Jonathan Shapiro   Commonwealth Bank may have wasted a "good crisis" by choosing to revert to a basic banking model rather than invest in new opportunities. That's the view of Deutsche Bank analysts Matthew Wilson and Anthony Ho after the lender delivered a cash net profit of $4.67 billion for the first half of 2019 that missed expectations. "CBA had the currency to be bolder, the management youth to be more contemporary and cutting edge, the time to invest, the capability to be more canny and a portfolio of option pay-offs," the analysts told clients on Thursday. "Instead it is now moving to a savings-and-loan model seeking cost reduction." Deutsche questioned whether CBA's prudence meant it was positioning for a more challenging environment where revenues were harder to come by, while global growth prospects became more uncertain....

Taxpayer funded inquiry used to raise money for Liberals Sydney Morning Herald February 8, 2019 12.00am Eryk Bagshaw   EXCLUSIVE  The Coalition is using a taxpayer-funded inquiry into Labor’s franking credits policy to raise funds for the Liberal Party, as the committee prepares to meet with dozens of angry retirees for the final time before Parliament returns. Letters to self-managed super fund trustees from Liberal MP Jason Falinski, seen by the The Sydney Morning Herald and The Age, show the House economics committee member using the inquiry to entice voters to donate to the Liberal Party in exchange for an audience with committee chair Tim Wilson. Mr Wilson is facing calls to resign after shadow treasurer Chris Bowen accused him of "collusion" with private interests to maximise political pressure on a Labor policy. The Victorian MP discussed co-ordinating protests at the inquiry with his relative, Geoff Wilson, the founder of a...

Savings cuts create aged-care ‘losers’ The Australian 12:00am February 7, 2019 Rick Morton   EXCLUSIVE  Aged Care Minister Ken Wyatt was handed a departmental briefing report showing the “winners and losers” from the Coalition’s $2 billion savings drive in the aged-care sector shortly after Scott Morrison announced a royal commission and denied funding cuts. Documents obtained by The Australian under Freedom of Information laws show the proportion of “losers” almost tripled to 53 per cent following the budget savings revealed in late 2015. In the three-year period to 2018, aged-care services that had been classified as “winners” almost halved to 47 per cent, according to the brief sent to Mr Wyatt. A series of “hot issue briefs, question time briefs and general briefs” sent to Mr Wyatt last year acknowledged the budget hit to the Aged Care Funding Instrument — which is the basic taxpayer care subsidy paid to all nursing...

Labor warming to a new enforcement agency to prosecute bank offenders Sydney Morning Herald 6 February 2019 11:45pm David Crowe   EXCLUSIVE  Australia’s corporate regulator is on notice to show a “radical” increase in court actions in the wake of the Hayne royal commission, with Labor warming to a new enforcement agency to prosecute offenders. In a new front in the political fight over the banks, Labor is considering the idea of a new “civil enforcement agency” that could take over the work of the Australian Securities and Investments Commission because the existing regulator has been too soft on wrongdoing. The number of criminals imprisoned from ASIC prosecutions fell to six last financial year, about half the usual number, and the number of criminal and civil actions concluded fell to 138, the lowest level in five years. While the regulator imposed civil penalties worth $42.2 million last year, up from just...

RBA governor Philip Lowe questions banks’ high returns The Australian 12:00am February 7, 2019 Michael Roddan   Australia’s banking sector is still among the most profitable in the world, according to Reserve Bank governor Philip Lowe, who questioned whether the super-sized return on equity generated by the major lenders was “sustainable”. Speaking in Sydney yesterday following the release this week of the final report of Kenneth Hayne’s royal commission, Dr Lowe said while banking sectors in many other developed English-speaking nations had registered a fall in profitability in the wake of the global financial crisis, that of Australian banks remained high by international standards. “At the moment the Australian banks are earning roughly 13 per cent return on equity,” Dr Lowe said. “When I talk to overseas bankers and ask them what return on equity they’re targeting, a number around 10 is common.” Banking stocks have surged in the wake of...

Non-bank lenders slash rates as wall of money floods property debt funding Australian Financial Review Feb 6, 2019 6.12pm Larry Schlesinger   Non-bank lenders, who have provided a funding lifeline to developers and investors following a retreat by the major banks, have been forced to slash interest rates by up to 400 basis points following a ramp-up in competition. Chrish Samuel, who runs finance house Windsor Capital Management, said he had witnessed rates fall from 12 per cent in early 2018 to under 8 per cent currently – including across his own business – for property-backed debt funding after more than a billion dollars poured into the short-term debt market recently. Windsor Capital has lent more than $275 million in the past 12 months to "experienced property developers". Its client list includes Salcorp, Chiodo Corporation, Frater Group and M Property Developments. As with other non-bank lenders, its capital comes from a...

CBA boss says heads will roll over financial planning scandal, but it won't be his ABC News6 February 2019 7:56pm Elysse Morgan   Matt Comyn has failed in his first big test to show that the Commonwealth Bank is cleaning up its act, in what he says is an "unacceptable failure" on the part of some bank staff. The bank failed to convince the regulator it had stopped charging fees for no service and Mr Comyn has indicated that heads may roll — but not his. "Ultimately I am accountable for everything that happens inside the Commonwealth Bank but, for those people leading that project, clearly we haven't delivered what we should have been and we will be doing a review and a number of those people have been stood down and there will be consequences that will flow from that," Mr Comyn told The Business. "In my mind it is...

'Right to be cautious': Philip Lowe, Matt Comyn back a role for mortgage brokers Australian Financial Review Feb 6, 2019 7.00pm James Eyers   Reserve Bank governor Philip Lowe has backed Treasurer Josh Frydenberg's cautious approach towards the royal commission's call for bank-paid mortgage broker commissions to be replaced with customer-paid fees, saying the impact on competition required consideration. Commonwealth Bank chief executive Matt Comyn also engaged in the most politically contentious issue from the royal commission's final report, backing the role mortgage brokers played to ensure a competitive market, and suggesting any new regulation should also require banks to charge customers an equivalent fee "so as to not create an uneven playing field". After listed mortgage brokers groups saw their share prices savaged following the royal commission's final report, the broking industry will kick off a national advertising campaign on Thursday arguing the move will drive customers to the largest...

REDRUM: Lunatic RBA slays economy Macro Business12:20 am on February 6, 2019 David Llewellyn-Smith   Policy error is the name of the game at the Australian central bank. Witness: ·         house prices in Australia’s two largest cities are in outright crashes; ·         it is spreading steadily to other capitals; ·         building approvals are crashing coast to coast; ·         infrastructure investment has topped out; ·         credit is swiftly falling towards zero; ·         the NAB business survey has crashed signalling the same for investment ahead; ·         PMIs [Purchasing Managers’ Indexes, a type of business sentiment survey –RJB] are crashing, corroborating the NAB survey; ·         car sales are marching lower; ·         retail sales have stalled and posted an Xmas shocker; ·         leading employment indexes have rolled over sharply; ·         monthly core inflation is at 1.4 per cent and tumbling; ·         bank share prices are down 40 per cent as they deliver unprecedented mortgage rate...

RBA governor Philip Lowe blames bank executives, not regulators for scandals Australian Financial Review Feb 6, 2019 3.50pm Aaron Patrick   Reserve Bank of Australia governor Philip Lowe called on banking executives to take responsibility for the scandals that triggered the royal commission, and cleared financial regulators of blame. The top policymaker stopped short of calling on National Australia Bank chairman Ken Henry and chief executive Andrew Thorburn to resign, although squarely placed the blame for industry misconduct on banking "managers". "There has to be accountability that that starts at the top," he told a National Press Club lunch in Sydney Wednesday. "Cultural change really starts at the top in organisations and the leaders of organisations really need to be focused on delivering the right culture and that's something at the Reserve Bank we talk a lot about as well. "Should the leaders take responsibility? Of course they should. What that...

Macquarie desk on fire - but who's caught in transition? Australian Financial Review Feb 6, 2019 12.15am Sarah Thompson, Anthony Macdonald   It has been a busy few days for Macquarie's institutional equities desk. The broker is believed to have been in the market with one of the biggest transition portfolios seen in recent years, which rival brokers reckon is worth at least $2 billion. It is not known who Macquarie has been selling for, but it looks very much like a big fish needing to swap shares for cash in a hurry. The question is whether it's a fund that needs its money back to meet redemptions - and redemption notices are flying around like confetti after a tough December quarter - or a superannuation or sovereign wealth fund reducing its exposure to Australian equities. The transition portfolio has had large blocks streaming through the market in the past week....

Banking royal commission: Taxpayer and customer costs sure to rise from all this box-ticking The Australian 12:00am February 6, 2019 Adam Creighton   If the big consulting firms were listed companies, their share prices would have surged yesterday too, the first trading day following the release of the recommendations of the Hayne royal commission. Compliance and bureaucracy were big winners along with the banks and wealth giants, thanks to a thicket of new reviews and compliance measures. “There are relatively few changes to the law; no meaningful structure changes to the industry; no radical changes to the regulatory model,” said analysts at Citi, reflecting a widespread view that Kenneth Hayne’s 76 recommendations amounted to a once-over lightly for the nation’s wealth giants. Macquarie analysts were right to highlight “increased compliance costs and costs of doing business” too, along with “near-term upside for banks and wealth managers” that included the biggest share...

A quick $22 million profit for royal commission insider trading? The New Daily 10:16pm, Feb 5, 2019 Michael Pascoe   Last week Josh Frydenberg “guaranteed” the royal commission’s final report would not leak while the government sat on it for three days. About $22 million says that guarantee wasn’t worth anything. The welter of news in Kenneth Hayne’s report has tended to overshadow what appears to be some rather obvious insider trading. Someone, somewhere, somehow received a nod and wink on Monday morning that the banks would actually come out of the royal commission better than expected. “Front running” is the market euphemism for what happened next. “Any alternate explanation is fanciful,” a fund manager wrote to me. “With the banks down a quarter per cent, some trader looked out the window at 11am and noticed it was all sunny and cheerful and decided to buy a half billion dollars worth...

Melbourne housing lot defaults at 25 per cent, says Satterley Australian Financial Review Feb 6, 2019 5.10pm Larry Schlesinger   One in four buyers of housing lots in Melbourne, the country's biggest residential land market, are defaulting on their purchases, says Financial Review Rich Lister Nigel Satterley. Mr Satterley, who runs the country's biggest private land developer, Satterley Property Group, had warned in December that around 5000 lots in new housing estates would either default or have to be on-sold quickly over the next 30 months due to Uber-driving speculators and foreign investors not being able to get finance. But, speaking with The Australian Financial Review this week, he said the situation was "much worse than I previously thought". "At a minimum, the fallover rate is 20-25 per cent in the Melbourne land market," Mr Satterley said including across Satterley's own housing estates. "This is up from 5 per cent in...

Banking royal commission failed on essential financial advice reform Alan Kohler   Kenneth Hayne’s final report was a stiff and eloquent ticking off of the financial services industries. But it is also a failure.   Specifically, his decision to not call for the separation of product and advice is both inexplicable and egregious. Another significant failure is that he has nothing to say about percentage fees and the high cost of financial advice. In fact, he seems to applaud it. Overall, Hayne’s report was well summed up by UBS’s bank analyst Jonathan Mott: it “fell well short of market expectations”. And none of the 76 recommendations “by themselves will have a material financial impact on the banks”. You might expect an analyst to celebrate that, but far from it: “We are concerned that ensuring lasting cultural change over the years may be difficult, especially as management and Boards rotate,” Mott says. Quite. And the...

ASIC orders Commonwealth Bank financial planning arm to halt service fees The Australian 9:21am February 4, 2019 Samantha Bailey, Joyce Moullakis   Commonwealth Bank’s financial planning business has been ordered to immediately cease charging service fees from its customers and not enter into any new ongoing service arrangements. The order by the financial services regulator comes after Commonwealth Financial Planning Limited failed to meet the requirements of an enforceable undertaking struck with ASIC in April 2018 in relation to fee-for-no-service conduct. The stinging rebuke by ASIC - on the day the Hayne royal commission’s final report becomes public - hits CBA on many fronts. The bank’s (CBA) Count Financial unit and other planning businesses will be spun off alongside its mortgage broking operations. That will be done via a demerger on the ASX, but investors will tread cautiously on the deal even after the inhouse planners were excluded from it. In...

The regulators failed bank customers but they are now being trusted to fix this mess Sydney Morning Herald 4 February 2019 11:45pm Adele Ferguson   After a year of shame and grovelling apologies, the day of reckoning finally arrived. For those Australians hoping for structural separation of the banks, an overhaul of the regulators or heads on sticks, royal commissioner Kenneth Hayne's verdict would have been disappointing. For those looking for massive structural change in the wake of the Banking Royal Commission, an overhaul of the regulators or a list of heads on sticks, Commissioner Hayne's verdict may have disappointed, says Adele Ferguson. There was little blood and gore. It was more like a soft landing. The royal commission spent a year listening to how many ways government regulators failed in their duty to regulate the financial services industry. Customers were ripped off but the regulators had little or no appetite...