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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: Bank RC Findings in Sept 2018: PM says "nothing to see here. I told you RC is a waste of money"

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The first rule of inquiries and investigations is you never call for one unless you know what the outcome will be.

There's something seriously rotten at the core of Australian banking

Ian Porter

2 December 2017

http://www.theage.com.au/comment/theres-something-seriously-rotten-at-the-core-of-australian-banking-20171201-gzwlkt.html

The decision to hold a royal commission into the banking system has been described as a backflip by the Malcolm Turnbull, but it could be worse than that.

This could also be seen as the Prime Minister and the banks taking control so that nothing unexpected happens. This is how you keep the banks onside, and the campaign donations flowing.

 

clip_image001Illustration: Matt Davidson 

The fact that the Coalition will be formulating the terms of reference means that the royal commission will turn out just as Mr Turnbull predicted several months ago. It will largely be a waste of time.

Does anybody really think that the banks threw themselves on the altar of public opinion not knowing what the outcome would be?

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The banks have had seven years to prepare their defences against conduct allegations. Photo: Paul Jeffers

The chief executives of the big four wrote to the Prime Minister this week asking for a royal commission because they understand well enough the first rule of inquiries and investigations  never call for one unless you know what the outcome will be.

How, you ask, do the banks know what the outcome will be? Simple, really. They will write, or heavily influence, the terms of reference for the banking inquiry that will emanate from Treasurer Scott Morrison's office

If you write the terms of reference, you will control the direction of inquiry, the depth of inquiry and the areas that the inquiry will investigate.

The banks have had seven years to prepare their defences against the allegations of unconscionable conduct that have been so outrageous they have actually made national news on more than one occasion.

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The big four are well prepared for a royal commission, writes Ian Porter. Photo: Wayne Taylor

For bank behaviour to have made it into the news cycle for, say, the brutal behaviour of CommInsure against life insurance claimants, is bad enough. But for bank behaviour to have made it into the cycle and the courts on multiple occasions is simply indefensible.

There is something rotten at the core of Australian banking, and it is the pursuit of profit at any cost. Banking culture for the last few decades has put shareholder rewards, and executive bonuses, ahead of bank employees, ahead of duty of care to the customer, ahead of social responsibility.

How else do you explain returns on shareholders' funds of 14, 16 and 18 per cent? These are astronomical numbers more fitting for high-risk industries – film production, clothing, automotive – and only then in a good year. For what is basically a low-risk infrastructure industry like banking, these returns are extortionate.

Backed by the government's underwriting of the banking sector during the global financial crisis, Australia's big four banks have swaggered around the financial markets doing as they please – remember exception fees? - knowing that politicians somehow equate the financial strength of the banks with economic stability and even national progress.

Why would [the banks] try to grow the Australian economy by backing our best and brightest? That's too hard. Let's just invest in mortgage lending.

It wouldn't be so bad if the banks were backing Australian entrepreneurs and manufacturers, lending money to people who could double, triple or quadruple the loans they owe by succeeding in their businesses; manufacturing, exporting and employing local people.

But, no, why would they try to grow the Australian economy by backing our best and brightest? That's too hard. Let's just invest in mortgage lending. What could possibly go wrong?

You simply lend to people who already own a house, so that, if the loan does go bad, you can grab the borrower's family home, which the banks insist should be offered as security. And, if the loan goes well, the borrower buys another house for renting and the pressure on the housing market continues to rise, as do the values of the homes in that market.

It's called speculation. Australian banks have now invested more than 60 per cent of their balance sheets in house mortgages in Australia. The next highest is 43 per cent in Norway, then 38 per cent in Canada and 30 per cent in the United States.

The banks have had a virtual government guarantee since the GFC and they operate in a market where the culture insists that home ownership is something almost everyone can aspire to. Except they can't, because the speculation by the banks and their investor borrowers have priced most people out of the market. Houses in Sydney and Melbourne – where half the population lives – are now 30 per cent overvalued.

Even the Reserve Bank thinks this over-reliance on mortgage lending is dangerous for the whole economy. If there is a readjustment of house values, the banks, their depositors and the national economy will be at risk. A properly constituted royal commission might recommend a limit of 35 or 40 per cent of a bank's balance sheet be invested in mortgages.

To avoid a shortage of mortgage funds, the government should also create a government-owned mortgage bank that will help low-paid Australians buy their first homes without having to battle it out with well-heeled investors.

Governments can borrow at lower rates than privately-owned banks, which means the government-owned bank could always offer lower interest rates than "free market" – that is, profit-motivated – lenders. Just as important, it will also act as a brake on bad behaviour, as the Commonwealth Bank did before it was sold to private interests.

Banks can then broaden their portfolios and greatly increase their support for Australian businesses and workers.

Banks are there to take our deposits and keep our money safe. Eliminating their ability to speculate on property may reduce earnings and dividends to our superannuation holdings in the short term, but when the real estate reckoning eventually comes, we will all be better protected if the banks are less invested in speculation.

Ian Porter is an Age contributor and former business editor.

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