Day 396: 'Existing regulation isn't the answer'
An introductory weekday newsletter from Schwartz Media. Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 396.
Today in summary: Afterpay reckons its credit checks are better than those the banks undertake; lawyers differ in their response to the Hayne royal commission; and India’s central bank prepares to weigh in on bank CEO pay.
-- Charis
Current banker panic level: 😨
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Buy now pay later credit company Afterpay has hit back on calls for further regulation by arguing its credit checks are better than those the banks undertake.
The Australian Banking Association, along with consumer groups Choice and the Consumer Action Law Centre are calling for regulators to bring Afterpay and payday lenders under the National Credit Protection Act. This would force them to conduct formal credit checks in line with those undertaken by the big banks. Afterpay isn’t convinced and it now has former Trade Minister Craig Emerson on the payroll arguing Afterpay’s algorithm-based tech means it can be more accurate than those using traditional bank credit checks. Emerson told the Sydney Morning Herald:
“The existing regulation of the financial services sector isn’t the answer."
A Senate Committee inquiry into payday lenders and buy now pay later services is due to report on February 22.
The Australian’s Ben Butler has taken a solid look at the law fraternity’s formal response to Commissioner Hayne’s interim report, and it seems the good fellows are not all on the same page. The Law Council of Australia wants simpler laws and an avoidance of any new laws. Law Council of Australia president Arthur Moses SC says:
“We don’t need more royal commissions or laws.
“What we need is more legal aid funding for people to pursue their existing rights and hold banks accountable.”
But the Law Institute of Victoria wants new regulations to force mortgage brokers to act both in the best interests of borrowers and in good faith. Meanwhile, the lawyers at UNSW’s Centre for Law Markets and Regulation say Australia’s financial regulation is already relatively simple by international standards.
While many of Australia’s big bank CEOs are on holidays spending their bonuses, India’s central bank is preparing to unleash a new set of rules linking CEO pay to bank balance sheet size, loan delinquency, profits and governance. The move comes after a number of scandals affecting CEOs of India’s state-owned banks. In its role as bank regulator the Reserve Bank of India is also reportedly planning to step up monitoring of bank boards, focusing on whether independent directors have dissented on board and management proposals.
Today’s burn prize: Shaw and Partners chief investment officer Martin Crabb
🔥🔥🔥
"A distinct possibility."
Analysts are getting jittery about the likelihood a deal by ANZ to sell its OnePath investments business to troubled wealth management firm IOOF will fall over.
The Commentariat
In the AFR Lateral Economics chief executive Nicholas Gruen muses that his latest (and repeatedly proffered) policy suggestion of “superannuation of the people, by the people, for the people” has yet again been pooh poohed by the Productivity Commission.
“Given governments provide employee super schemes for their own public servants, we should all be able to access them. With super compulsory and the sector pervaded with market failure, this solves lots of problems.”
Liberal senator for Victoria, Jane Hume, who chairs the Senate Economics Legislation Committee, serves up a similar sass, saying even industry funds need to sleep with one eye open, no longer free to hide “behind the carapace of the performance of larger, well-run funds”.
But she remains unhopeful.
“Because of the unholy trinity of industry funds, unions and the Labor Party, the ALP finds it impossible to put aside vested interests and reform superannuation with policy priority given to the member rather than the provider.”
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