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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Australian Big Banks' nice earners from DODGY LOANS are melting away. OR are they?

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The big banks' nice earners are melting away

Australian Financial Review Mar 22, 2019 11.00pm

Karen Maley

 

After months of crippling humiliation before the Hayne commission, the last thing the country's big four banks wanted was another portent of looming competition.

But that's exactly what they got in September when the country's largest super fund, AustralianSuper, announced it was committing £230 million ($425 million) to finance a new office, hotel and residential unit development in London, known as One Crown Place.

It was a logical next step for AustralianSuper, which had already lent some $1 billion to Australian companies, but almost always in tandem with one of the big four local banks.

In contrast, there were no local banks in sight in the One Crown Place deal – which boosted AustralianSuper's international loan exposure to more than $2 billion. In that transaction, AustralianSuper found itself rubbing shoulders with major global banks.

It was a bitter reality check for the big four. They'd been enthusiastic about enlisting the country's $2.8 trillion superannuation sector into the corporate lending space, believing that it could help alleviate the increasing capital pressures that limit how much corporate lending they're able to do.

They imagined they would be able to keep lending large licks of money to local corporates, but then on-sell big chunks of these loans to grateful super funds.

'I call it death by a thousand cuts'

But AustralianSuper's London deal showed the big super funds are nursing bigger ambitions. They're not content to merely act as passive partners of the big banks. They want to be significant players in their own right.

And that means the big four banks – already straining under more aggressive regulation and confronting a sharp slowdown in the highly profitable home loan market – face yet another incursion into their traditional domain.

"I call it death by a thousand cuts", says one highly regarded bank director. "There's Afterpay in personal lending, and Apple wanting a share of the profit margin in payments.

[Earlier this year, Commonwealth Bank joined ANZ in providing Apple Pay, a service that allows customers to use their iPhones for tap-and-go payments, putting pressure on Westpac and NAB to follow suit. Apple takes a cut of the fees banks receive from credit card companies.]

"And companies like TransferWise [an online money transfer service] are eating into foreign exchange profits. It's just drip, drip, drip."

At the same time, banks have to devote significantly more time and resources fielding inquiries from the corporate regulator, the Australian Securities and Investments Commission.

"It's just the distraction", shrugs one senior banker. "Time spent responding to ASIC is time not spent on other things. All of that adds up."

ASIC's ongoing investigations into banks' past misconduct and its new "litigate first" strategy has intensified the sense of gloom hanging over the banks.

Fears of jail time

A chill swept through the entire industry earlier this month when The Australian Financial Review revealed the CBA's top bankers and directors –including chairman Catherine Livingstone – were being interviewed by ASIC as the corporate regulator moved closer to launching a landmark case against the bank and its board alleging breaches of directors duties and continuous disclosure obligations.

It's a far cry from the days when being a CBA director was one of the the safest and most prestigious board positions in the country.

However, one of the country's most highly regarded chief executives warned against over-reaction.

He acknowledges that ASIC has changed its stripes, saying "ASIC has gone from being an understanding regulator to being a regulator that's now determined to get some scalps on sticks to show to their political masters and to the public".

But, he adds, "I suspect some sort of over-reaction isn't surprising given the slackness of banks and bank boards in fulfilling their responsibilities."

Fuelling alarm in corporate circles are whispers that directors of another bank who were also subjected to ASIC questioning weren't even permitted to bring note-takers with them into the interrogation.

Already, the newfound zeal of regulators for prosecuting bank directors is already causing people to think twice before agreeing to join a bank board.

"It probably won't put you in jail, but it could give you many years of being afraid that you may go to jail," comments one banker.

He adds that it's not unusual for it to take five years from the initial ASIC investigation until the final outcome of any court case. "Many people face five very stressful years."

The end of an era

Not all business leaders are sympathetic to the banks' plight, with one pointing out that the Hayne commission had demonstrated that the banks had been systematically charging dead people for financial advice.

"To turn around and say that the regulators have gone over the top is quite outrageous," he argues.

"There needs to be a complete culture change in some of these institutions."

It is, however, far from easy to instigate a cultural revolution when credit growth is braking sharply, competitive threats are multiplying, and you're having to batten down for more painful times ahead.

"They've had a phenomenal run, really," says one top chief executive. "The financial services industry globally has had a wonderful time since about 1980.

"There's been massive deregulation and a large and sustained asset price boom. And, apart from the global financial crisis, there's also been continued credit expansion."

But, he adds, "this modern golden age of banking was bound to end sooner or later because of the growth of other technologies.

"And there was bound to be some re-regulation because the financial services industry somewhat abused the privilege of deregulation.

"So what we're seeing is this reversion to a more normal, less privileged industry, where there are more normal returns, more normal competition and more normal scrutiny."

The new mantra for banks

What's more, he warns that bankers should not be pinning their hopes on a return to their golden days.

"I think banks should be prepared for a tough time. It's not just the royal commission. This is what it's like being in a normal industry."

It's likely bankers will also have get used to increased competition from alternative sources of finance.

"The more you regulate banks, the more the activity moves somewhere else.

"Mortgage brokers are now going to other sources of funding, such as high net worth individuals and non-bank financial institutions.

"And it probably makes sense for the big industry super funds to do more direct lending to corporates."

The country's top bankers are responding to the more challenging environment that now confronts them by embracing the mantra of "simplicity".

Gone is their old ambition to be giant financial supermarkets: huge one-stop shops for all their customers' banking, superannuation and insurance needs.

They're now shedding businesses such as insurance and wealth management as they try to redefine themselves as agile, lean competitors determined to protect their core business.

But some suggest banks should be careful not to take their newfound enthusiasm for simplicity too far.

"In 10 years' time, people will question why they exited some of these businesses," says Luminis Partners co-executive chairman Simon Mordant.

"And I wouldn't be surprised if the banks buy back into some of them as they seek out new sources of growth."

 

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