Day 316: A 'testing' day for AMP
An introductory weekday newsletter from Schwartz Media. Counting the days since the banking royal commission was established.
Good afternoon and welcome to day 316.
Today in summary: Funds continue to rush out of AMP’s wealth management business in a A$1.5 billion royal commission hit; bankers head to Canberra to help politicians work out just how financially stressed drought-affected farmers are; and ASIC imagines a new world where it’s a bigger, and better organisation.
-- Charis
Current banker panic level: 😱
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Royal commission poster child AMP has one less headache after offloading its life insurance arm today in a deal worth A$3.45 billion. Unfortunately, its wealth management business continued to bleed funds, in what AMP acting chief Mike Wilkins called a “testing quarter”. Net cash outflows from its Australian wealth management business were A$1.5 billion in the 3 months to September, up from A$243 million in the same quarter last year, and inflows remain weak. AMP shares closed down more than 23%.
Bankers from ANZ, Westpac, NAB, Commonwealth Bank and Rabobank are in Canberra today for a Drought Finance Taskforce meeting with Treasurer Josh Frydenberg. The taskforce is focusing on the impact of the drought, both on farmers and small businesses in the wake of damning royal commission findings. The banks will be bringing along anonymous data on customers, which the government says it will use to “better understand the finance related challenges that have or may in the future impact drought-affected communities”. The meeting precedes tomorrow’s National Drought Summit being hosted by Prime Minister Scott Morrison.
ASIC chairman James Shipton has told Parliament it’s time for a “constructive conversation” about the regulator’s powers, positioning and size. ASIC is seeking more powers and increased penalties for companies it finds breaking the law, after it came under heavy criticism for its enforcement record in the royal commission interim report. Shipton told Senate Estimates Australia’s superannuation system meant banks in Australia had greater power than those operating in other markets.
“[This] heightens our responsibilities as a regulator but equally it heightens the responsibilities of financial institutions to live up to their part and to put it bluntly to live up to their basic legal obligations which they are not doing.”
Today’s burn prize: AMP
🔥🔥🔥
“AMP regards its army of advisors as a core asset, one central to its business model. It is committed to retaining them. The royal commission and ultimately the government might, however, leave it with no option but to unpick the vertical integration in its model and distance itself from the advisor network.”
Age columnist Stephen Bartholomeusz hints at AMP’s next nightmare, now that it has divested its life insurance business.
The Commentariat
Codes of conduct should be an area where the banking royal commission’s final report recommends specific reforms, writes Commonwealth Bank whistleblower Dr Benjamin Koh.
“The truth is that most codes of conduct are just glossy, aspirational documents handed to new employees then promptly forgotten until an excuse to fire someone is needed. Their lie has been exposed by the many examples of dishonest, illegal, deceptive, fraudulent, grossly incompetent or grossly negligent conduct revealed by the royal commission.”
ASIC’s track record in holding bankers to account - 800 people banned from providing financial services or credit, and around 400 banned from being company directors - fails to highlight its focus tends to be on smaller players, writes the ABC’s Andrew Robertson.
“From the outside looking in, it appears there's one rule for the big guys and another for the little players.”
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