Day 453: 'They are wrong'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 453.
Today in summary: NAB has accepted 72 of the 76 royal commission recommendations and has already implemented 26; former financial adviser Gabriel Nakhl has been sentenced to 10 years in jail after ASIC found him with his hand in the cookie jar; FASEA has released its final accreditation policy; and Fintech lender Prospa told told the Economics Legislation Committee that the concentration of lending among big banks had caused a market failure in the SME sector.
-- Alex
@AlexESampson
Current banker panic level: 🤑👩🎓😓
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1. National Australia Bank says it has completed or is in the process of implementing 26 of 72 recommendations from the banking royal commission final report. In a market update today, group chief Phil Chronican said NAB agreed with 72 of the inquiry’s 76 recommendations, including no longer charging default interest to agricultural customers impacted by drought, removing grandfathered commissions for NAB Financial Planning advisors and extending the protections of the Code of Banking Practice to small businesses with less than $5 million in total borrowings, up from the previous agreed level of less than $3 million. The bank said it would work with Government and regulators with “a view to taking positive action as soon as possible” on the remaining areas. This comes after CBA last week released its response to Kenneth Hayne’s royal commission.
2. Former financial adviser Gabriel Nakhl has been sentenced to 10 years in jail for dishonest conduct, after being found guilty in the District Court of NSW. Mr Nakhl was convicted on eight charges brought by ASIC. ASIC today released a statement revealing Nakhl advised 12 clients to set up self-managed superannuation funds and to invest their superannuation and other funds in products such as shares, managed funds and high interest rate bank accounts. Rather than investing the funds in these products, Nakhl used the money “as he pleased” for his own purposes. He lost A$5.1 million of the $6.7 million he was entrusted with.
3. The Financial Adviser Standards and Ethics Authority has released its final accreditation policy. FASEA changes to financial adviser education and accreditation standards were announced by the Federal Government in 2017, and were reiterated in Commissioner Kenneth Hayne’s final banking royal commission report. The problem of low education and accreditation standards was also raised in the 2014 Murray Financial System Inquiry, but standards have not risen appreciably since then.
4. Fintech lender Prospa told the Economics Legislation Committee during hearings for the Australian Business Securitisation Fund Bill 2019 today the concentration of lending among big banks had caused a market failure for small and medium businesses.
Prospa co-founder and joint chief executive Beau Bertoli said:
“We believe that the relative advantage enjoyed by the larger banks and their economies of scale have allowed them to maintain a market share and that this can be balanced by some government intervention.”
The bill, introduced by Treasurer Josh Frydenberg on Wednesday, proposes to establish the A$2 billion Australian Business Securitisation Fund to enhance access to debt finance for Australian small and medium businesses by improving smaller bank and non-bank business lenders' (such as Prospa) access to the Australian securitisation market. Bertoli said Prospa believed the fund could create a more diverse and profitable finance market.
Today’s burn prize: CUA chief executive Rob Goudswaard
🔥🔥🔥
“In the context of the royal commission and the cultural behaviours it highlighted, Australians are clearly looking for an alternative that empowers them by placing the control of their finances back in their hands.”
Goudswaard said Australia’s largest credit union absorbed rising funding costs rather than pass them on to its members as he announced CUA’s first-half profit ha slipped 19.8% to $23.07 million. In a passive swipe at other financial institutions, Goudswaard said CUA was owned by members, not shareholders, and therefore “put the interests of our members at the heart of everything we do”.
The Commentariat
The Australian senior writer John Durie argues that NAB is on the wrong track with mortgage brokers. Durie says it’s the wrong move for the bank to want to work with the changes proposed after the government’s backflip in favour of brokers.
“Brokers are still arguing that working in the best interest of clients is a different question for them than it is for a financial adviser dealing with your life savings. They are wrong and NAB agrees with them.”
An editorial in the Sydney Morning Herald argues that Treasurer Josh Frydenberg’s backdown on trailing commissions for mortgage brokers sent a bad signal for how he plans to implement the other 75 recommendations of the Hayne royal commission. The piece argues the move will “invite” banks and other financial institutions to use their lobbying power “to water down and delay other measures”.
“This is an industry with a poor record of self-regulation which should be kept under the microscope. Former top public servant Steven Sedgwick, who the banks themselves asked in 2017 to look into the conflicts of interest faced by mortgage brokers, this week said banks had failed to respond satisfactorily to his recommendations.”
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