BFCSA Blog

Low interest rates exacerbate real risks Australian Financial Review May 18 2016 11:15 AM Christopher Joye   Don't buy into the Reserve Bank of Australia's ever-cheaper-money-makes-us-better-off bullshit. Taking on more record debt at the puniest interest rates in human history to artificially boost economic activity to some theoretically acceptable growth rate – and the existence of zombie businesses that would never survive with a normal cost of capital – is plainly stupid. The same logic applies to mindlessly chasing absolute yields and buying horrifically overvalued investments just because the RBA wants to ignite "animal spirits". The risk-averse would be better served making peace with meagre returns and avoiding catastrophic capital losses when fundamentals wrest control of asset prices back from policymakers who think they know better. To recap, on May 3 the RBA decided to slash the cash rate to a new all-time nadir of 1.75 per cent, even though growth...

By Houses and Holes in Australian Property, Australian recession at 12:45 pm on June 5, 2015 http://www.macrobusiness.com.au/2015/06/the-dumbest-bubble-in-history-is-the-rbas/   Chris Joye doesn’t mince words today:   There’s only one party to blame for Australia’s unprecedented house price bubble. And it’s not buyers, vendors, developers, immigrants or local councils restricting new approvals. While they have all contributed to the underlying demand and supply dynamics, the unsustainable price growth across Sydney and Melbourne since January 2013 is squarely the responsibility of the monetary policy mandarins residing in the Reserve Bank of Australia’s Martin Place headquarters. It is these folks who dismissed our repeated warnings that they were blowing the mother of all bubbles and instead decided that the cheapest mortgage rates in history—enabled by cutting the cash rate a full 100 basis points below its global financial crisis nadir – is the elixir required to maintain “trend” growth. Never mind that this might actually...

RBA needs to address Australia's property bubble: UBS The Economy September 16, 2014 Bianca Hartge-Hazelman http://www.smh.com.au/business/the-economy/rba-needs-to-address-australias-property-bubble-ubs-20140916-10hex2.html 'Lazy analysis': Joe Hockey dismisses bubble talk $A overvalued, says internal RBA document RBA awake to property bubble risks UBS global chief economist Larry Hatheway has warned that unless the Australian dollar falls below US85c in the near future, the Reserve Bank may have little choice but to use other tools besides changing rates to ward off bubble-like conditions in the property market. Speaking as he was wrapping up a tour of Australia, Mr Hatheway observed that just as Australia was beginning to wean itself off its dependence in the mining goods sector, it must now rebalance its economy towards consumption, as well as investment in other areas of exports.  "That's going to require, in my view, a weaker exchange rate. Getting from here to there though will be difficult. The Reserve Bank could facilitate...

  BY Christopher Joye - 06 Mar 2013 00:06:00   In a globally unique policy, the Reserve Bank of Australia will supply banks with a permanent bailout facility worth up to $380 billion by 2015. The policy has been designed by the RBA to help banks satisfy stringent new liquidity tests which simulate “acute stress scenarios” that deny banks funding for 30 days under the post-GFC rules, Basel III. Local regulators argue that insufficient liquid assets such as government bonds meant they had no choice but to give the banks a new taxpayer-backed “line of credit” that could be tapped at a cost just above the RBA’s cash rate. Smaller building societies and credit unions are not subject to the liquidity tests and will not, therefore, have access to the bail-out fund. Remarkably few people inside or outside financial markets are familiar with, or understand, this “committed liquidity facility”, which will...

  By Nick McKenzie and Bentley Dean Updated September 27, 2013 09:47:00 Monday 30 September 2013 The Reserve Bank of Australia is meant to maintain stability in the nation's financial sector. It is supposed to be above reproach in its behaviour. But is it? Why did bank-appointed officials and employees break sanctions in Iraq and cosy up to Saddam Hussein through a "front man"? Why did a former Deputy Governor and other directors hand-picked by the Reserve Bank to safeguard its subsidiary companies from corruption, end up — over a decade — overseeing some of the most corruption-prone business practices possible? Why did they allow millions of dollars to be wired to third parties in foreign countries, including an arms dealer, in order to win banknote contracts in deals police now allege involved bribery and corruption? On Four Corners two whistleblowers-turned star police witnesses from RBA companies, Note Printing Australia and...

  Date April 10, 2013 ·(1)   Michael West Business columnist Analysis It’s an Aussie battler’s worst nightmare. You’ve got a macking big loan with the bank but the value of the family home is falling. Times are tough. You’re veering towards the dreaded ‘negative equity’ territory,  that is, being underwater on your mortgage, or owing more to the bank than your home is actually worth. As it turns out the Reserve Bank of Australia is having a ‘negative equity’ nightmare of its own. Just a three per cent fall in the value of its assets and the RBA is underwater. Good thing the RBA has a sugar daddy, Joe Hockey. To explain, Treasurer Wayne Swan blithely snipped a $500 million dividend from the Reserve Bank’s wilting cash reserves last year. The bank had just made its first profit in three years and the government commandeered almost half of it. It had to make the budget look good...

Mother of all bailout funds March 6, 2013 - 1:03PM  SMH   Michael West:           Business columnist  View more articles from Michael West Only the big banks have access to the bailout fund. Anybody keen for a loan of $380 billion at, let’s say, an interest rate of 3.4 per cent? Sounds nice eh? Well, you the taxpayer are in the process of actually making such a loan. Or at least you will soon extend, most kindly if as yet unwittingly, such a credit facility to the big banks, to be used at any time, at their discretion. Taxpayers already guarantee some 60 per cent of bank funding via the deposits guarantee for zero compensation.    Yes, it is exceptionally generous, the so-called Committed Liquidity Facility, which is in effect a permanent bailout facility which comes into play in 2015.   In a story somewhat interred in the inside...

RBA exposes low-doc loans risk: BY:ANTHONY KLAN AND ADAM CREIGHTON  From:The Australian  August 22, 2012 12:00AM BORROWERS using "low-doc" home loans are four times more likely to default than people on standard mortgages. The Reserve Bank said yesterday there was about $50 billion worth of low-doc loans, representing 5 per cent of bank balance sheets. A tightening in credit standards and the introduction of anti-predatory-lending laws following the global financial crisis had contributed to a drop in new low-doc loans, which now represent only 1 per cent of the new home loans being written, the RBA said. The RBA's analysis of low-doc loans came as new research at the central bank's annual economics conference suggested Australia's mortgage market might be about $100bn larger than the legal system, economy and credit checking systems required. The Sydney conference was also told there may be a case for greater use of hard limits on...

Stop talking, RBA, and do something!!!  -- By Leith van Onselen -- The Reserve Bank of Australia’s (RBA) Financial Stability Review, released yesterday, contained at least three unambiguous warnings that Australian lenders should not seek to relax lending standards in a bid to increase market share and boost profitability: “With demand for credit likely to remain moderate, a challenge for firms in a competitive banking environment will be to resist the pressure to ease lending standards to gain market share in the pursuit of unrealistic profit expectations…” “While there is little evidence over the past year that they have been imprudently easing lending standards in a bid to boost their credit growth, they are seeking ways to sustain the growth in their profitability, including, in some cases, through cost cutting. Such strategies will need to be pursued carefully to ensure that risk management capabilities and controls are maintained…” “…it would be undesirable if banks responded...

RBA could already be selling $A overseas: UBS   [Published: 7 Nov 2012] -- Investment bank UBS believes the Reserve Bank of Australia (RBA) could already be printing Australian dollars and selling them to foreign central banks in a bid to minimise buying pressure on the currency, The Australian Financial Review reports. Such a move is said to be an exact adherence to suggestions made by former RBA board member Warwick McKibbin to the newspaper in August. According to the AFR, UBS analysts Gareth Berry and Andrew Lilley have raised concerns over what they deem to be a sudden accumulation of foreign exchange on the central bank's balance sheet during the months of August and September. The accumulation has been labelled a form of “passive intervention” and reportedly been matched by a lift in deposits of overseas institutions held at the RBA. In the week ending October 31, $2.1 billion is reported to have been deposited, which...

RBA officials 'withheld information'  Sydney Morning Herald - ‎6 hours ago‎           Review of the Reserve Bank Annual Report 2011. Reserve Bank officials neglected their directors' duties in handling the banknote bribery scandal and withheld damning information from parliament, according to comments in a parliamentary committee report...

    by: James Glynn From: Dow Jones Newswires October 22, 20123:31PM AUSTRALIA'S central bank will ask participants in the $10 billion residential mortgage-backed securities, or RMBS, market for greater transparency surrounding the debt class being used in repo operations. The Reserve Bank of Australia, or RBA, recently completed a review of reporting requirements currently in place in the RMBS market, and issuers will now need to provide more comprehensive and up-to-date information on the securities. "We have sought to achieve some uniformity and greater depth in the information reported," said Guy Debelle, assistant governor for financial markets at the RBA, at an industry conference here. Mr Debelle made the point that reporting standards often vary significantly across issuers, since there is currently no regulatory standard for RMBS reporting. Current standards call on issuers to provide data relating to the asset pools that back the securities and a list of mortgage issuers...

In the FOS process of compensation, it appears FOS credit the bank with any (if any) of the borrower's "negative geared" previously enjoyed tax benefits during the time of the problem loan period ("the period"). The FOS position pertaining to ATO 'offsets' ('credits') clearly purports to apply ATO offset benefits to the banks to determine the borrowers overall appropriate "compensation package".The FOS asserts that the banks are entitled to quote; "rent received from leasing the property and any tax deduction received for an investment property" It appears, that the banks have enjoyed an FOS directed "unjust enrichment" in the form of an inappropriate tax offset benefit to their overall incumbent liability to the borrower by disgorging &/or transferring any of the borrower's tax offset benefits obtained during the period by way of the borrower  "negative gearing" the problem property.   Simply put, it's incumbent upon the applicant upon receipt of any bank interest...

JUST HAD A INTERESTING CONVERSATION WITH FOS. I MENTIONED THAT I WANTED INFORMATION FROM THE BROKER. COULD FOS GET THAT INFO. NO I HAD TO GO TO THE CREDIT OMBUDSMEN SERVICE THEY WILL APPROACH THE BROKER. I MADE THE POINT THAT THE BROKER HAD FILLED IN, INCOME THAT WAS DIFFERENT TO WHAT I HAD SUPPLIED HIM WITH. FOS STATEMENT WAS WHO WAS THE BROKER WORKING FOR. WHAT DO YOU MEAN I SAID. WAS THE BROKER ACTING AS A AGENT FOR THE LENDER OR WAS HE ACTING AS A AGENT FOR THE BORROWER. IF HE ACTS FOR THE LENDER THEN THE LENDER IS LIABLE  IF HE IS ACTING FOR THE BORROWER THEN THE BORROWER IS LIABLE AS THE BORROWER HAS BASICALLY EMPLOYED THE BROKER TO ACT FOR THEM UNDER ANY CIRCUMSTANCE. THIS IS FOS`s THINKING. WHO PAID THE COMMISSION?. US OR THE BANK. SO DOES FOS USES THIS AS ONE OF THERE DETERMINATIONS TO FLICK YOUR COMPLAINT. THE SECOND QUESTION I...

Financial Ombudsman Service Circularlssue 5 - March 2011   When investigating a dispute about a low doc loan, we consider the following matters: * Did the client fully understand the process, so that it can be said that a conscious decision has been made? * Have clear questions been asked of the client in assessing the relevant and available information? * Have the monthly repayments been accurately calculated and disclosed at the time of application? * Was legal or financial advice recommended and/or required? * Did the FSP engage in good industry practice by exercising the care and skill of a diligent and prudent lender in: a) selecting and applying credit assessment methods; and *b) forming an opinion about the client's ability to repay? Was there lnformatlon in the appllcatlon which should have led a reasonable and prudent lender to make further inquirles, but the FSP chose not to? "...

I sent in a complaint to FOS about an issue that is unique to our situation, but which I believe was borne out of the Predatory Lending practices of the bank. FOS' response is that they 'cannot consider' our dispute.  However, the uniqueness of our situation shows that their response was really pretty much a cut and paste job.  I have had to write back and ask that they give my complaint due consideration, without presumption. FOS made at least nine presumptions in their response.  It appears to me that they aren't even reading our complaints but just sending back fob off answers.  To tell the truth, I don't expect they will give any more regard to this letter as they did my original complaint.  But I live in hope :). Dear (FOS), In all due respect, it is clear to me that you did not read and understand my complaint.  ...

Hi Members,   Found some interesting information on FOS website under the search Maladministration in Lending Sorry was not able to copy the info on this blog.   NC2011 - Responsible Lending - Presentation.pptx    (powerpoint presentation)  Responsible Lending Conduct Obligations & Maladministration ...

The Dispute Resolution Process   Terms of Reference: The Law – 5 legal counsel, legally trained case managers and case officers Applicable industry codes or guidelines – Code of Banking Practice, EFT Code, Centrelink Code Good industry practice – seconded banking adviser and financial services industry adviser Fairness Types of Disputes Delay in settlement Decision to lend – lending when there was no capacity to repay the loan Conduct of bank if it sells property as mortgagee in possession Errors in charging fees (however, we cannot look at a bank’s policy decision to charge fees) Types of Disputes                            Breaches of bank’s duty of confidentiality or breaches of privacy Funds transfer problems – telegraphic transfers, internet banking Debt collection – disputes about the amount demanded; debt collection practices if conduct is by member or agent of member; credit listings with Veda Advantage Ltd (formerly Baycorp Advantage) Requests for a variation in...

 Help please!!! FOS it appears is planning to close our case. Re: complaint of falsified docs, unconscionable behaviour, attempted repossession and no LAFS. It is a commercial loan but we were made to be guarantees.  A deadline has been given to answer questions on our losses however the lender seems to be excused for not answering our questions in validation and falsifying contracts. The lender also ignored the evidence that they wrote the debt off, as we have evidence of them requesting the insurer for payment of the debt. They also would be claiming this in Tax.   It took FOS 6 months to come back with a letter that provided no answers to our questions or validation. The only response from the lender was to say that they will make no further submissions. FOS says that’s fine as the lender answered FOS questions. We don’t even know what those questions were...

Responsible Lending Conduct Obligations & Maladministration ... www.fos.org.au/.../responsible_lending_conduct_obligations_...Cached You +1'd this publicly. Undo Responsible Lending Conduct Obligations & Maladministration. ... For some years, FOS has considered disputes regarding “maladministration in lending”. ... In Regulatory Guide 209 (RG 209), the Australian Securities and Investments ... [PDF] Responsible Lending Obligations and Maladministration in Lending fos.org.au/public/download.jsp?id=14492     Not helpful? You can block fos.org.au results when you're signed in to search.fos.org.au Block all fos.org.au results You +1'd this publicly. Undo File Format: PDF/Adobe Acrobat - Quick ViewFor some years, FOS has considered disputes regarding "maladministration in lending". ... maladministration in lending, loan management or security matters. ... Regulatory Guide 209 (RG 209), the Australian Securities and Investments ... Many thanks to ARREE for the idea ! ...

There has been a lot of chatter about FOS and about it's role and how it conducts investigations. If you go to the FOS website; www.fos.org.au and go to the members section and join it  (joining it is free). Then take some time to do there E learning sessions and take some time to read and understand their Terms of Reference. I found this short course and booklet very useful and provided great information....

Please pay attention.  FOS are not useless.  They have a role to play and I have achieved good outcomes through this process.  The initial letters are of a generic type.  Please start working out your claim by using the template devised by BFCSA re Benefits to me etc.....  Yes if you have spent the money on your self you have a debt owed and that is your debt and cannot be waived.  If you spent bank's money on interest fees and charges, the bank has to consider dropping all of these costs as they cannot profit from a fraud.  We are looking for Maladministration in Lending.  FOS is very aware of recent High Court decision. We switched from complaining to the banks to registering with FOS as they have specific powers that can assist each one of you and cause the banks to hand over the documents they have been refusing...

From FOS's letter in previous post and in addition to the post's comments:  'Reply to FOS' FOS says: "I strongly suggest you make whatever payment you can while we are considering your dispute.  This will help protect your financial psosition because unless you make payments, interest & charges will continue to accrue & your debts will increase.'" BFCSA Members: Be aware, that once you have lodged a FORMAL COMPLAINT to FOS, your bank MUST stop all action against you.   Go to the ACCC & ASIC Debt Collection Guidelines for Creditors   MEMBERS, CHECK IT AND EDUCATE YOURSELVES Refer to: Part 2 Section 2 [a],[b]&[c] Part 2 Section 4 [d] Part 2 Section 6 [e] Part 2 Section 7 [a]&[b] Part 2 Section 9 [e] Part 2 Section 10 [a],[b],[e], [g]&[h] Part 2 Section 16 [a]&[b] Part 2 Section 18 [a],[b],[c]&[g] Part 3 Outlines the provisions in the ASIC Act Section 12DA(1) and...

Hey Everyone,   I am in the middle of competing against the FOS in the races of my life. The olympics that Denise emailed about.  I am competing in 2 events  at the moment.  The 1st event a 100M dash has seen the Gold Medal go to FOS and I am still running. This event consisted of emailing back and forth about 5 I think with the FOS eventually taking the lead. The second event is the 1500m run and the tables are about to turn.  What's that old saying you need a stout heart to climb a steep hill.  Well that hill has become a mountain the height of Everest. This event is about imprudent lending, fraudulent docs, no broker authorities etc.  You know the general corruption we have all been eventing with.   This time it will me me taking the lead running as fast as my fat little legs will go.  If I do...

Today we received our first response from FOS regarding one of the lenders we have borrowed money from - ANZ - Surprise, Surprise!!! The response we got from FOS was not what we expected & infact very disappointing...Here is what their resolution is if the loan is proven to be maladministration... ************************ 'In order to put the applicant in the position they would have been in had the finance not been approved, any property pruchased with the funds from the loan must be sold, and proceeds from the sale must be applied to the debts.  This is because an applicant cannot retain the beenfit of goods purchased with a loan and at the same time claim that he or she should not be liable to repay the loan. If the FSP (Financial Service Provider) should not have lent the money and the proceeds from the sale of the property are insufficient to repay...