Day 463: 'Why did we do this?'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 463.
Today in summary: The growing cost to the banks of charging fees for no service is heading for billions territory, as Westpac gets in early ahead of its May results with a A$260m first-half provision; the government will levy A$600m on the banks to better fund regulators; and NAB kills off home loan introducer payments.
-- Charis
Current banker panic level: 😱😫 🙄
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Westpac says its first-half profit will be reduced by A$260 million as it continues to pay out compensation to customers who were charged fees incorrectly, or not given the right product. The bank flagged more remediation costs to come, but it’s still working out how much it will have to pay back to financial advice customers of its authorised representatives.
Westpac CEO Brian Hartzer said:
“As part of our ‘get it right put it right’ initiative we are determined to fix these issues and stop these errors occurring again. We will continue to review our products and services to ensure they deliver the right outcomes for customers, and if necessary, make further provisions.”
Australia’s major banks could be up for almost A$1.2 billion in levies, should Labor win the Federal election, following the latest funding boost to the regulators announced by the government over the weekend. Treasurer Josh Frydenberg committed an additional A$400 million for ASIC and A$150 million for APRA over the next four years. The funding will, among other things, help ASIC expand its on-site supervision program, and APRA extend the Banking Executive Accountability Regime to insurers and superannuation funds.
It comes after Labor promised a A$640 million Banking Fairness Fund which will raise A$160 million a year via a levy on the ASX100 banks, covering more lawyers and financial counsellors for those in financial difficulty.
The government also committed an additional A$35 million for the Federal Court of Australia to help it prosecute financial misconduct.
NAB has decided to ditch the payments it has been offering third parties for home loan referrals via its introducer program. The change won’t come into force until October this year, and consumer group CHOICE said the bank has known the program was “shonky” since 2015. Policy and campaigns adviser Patrick Veyret said:
“It’s shameful it’s taken this long for them to act. Thousands of Australians have had their lives affected by false applications from this introducer program. The Royal Commission revealed that many Australians were duped by introducers into unaffordable loans and defaulted as a result.”
Commissioner Hayne criticised such payments for their potential to induce dishonest conduct, but did not recommend they be banned in his final report.
Coming Up
NAB chief customer officer Mike Baird will be appearing at a roundtable at the Australian Financial Review’s Banking & Wealth summit tomorrow. More details here.
Today’s burn prize: NAB Chairman-elect Phil Chronican
🔥🔥🔥
“"In the cold hard light of post royal commission thinking ... why did we do this?"
Chronican acknowledged the problems of the bank’s introducer program, despite former CEO Andrew Thorburn standing by it just weeks ago.
The Commentariat
Provisions by the major banks for remediating customers charged fees for no service could hit A$2 billion writes The Australian’s Richard Gluyas.
“Now that this is all out in the open and a reinvigorated ASIC is birching the banks at every opportunity, there is zero incentive for the industry to drag its heels, as the interest clock keeps ticking.”
NAB’s move to scrap introducer payments for home loans would have been a “no brainer” for incoming chairman Phil Chronican, writes the Sydney Morning Herald’s Elizabeth Knight.
“And announcing it in the days leading up to his appearance before the House of Representatives Economics Committee certainly provides a handy platform for Chronican to provide evidence that NAB is acting decisively on improving the treatment of customers.”