Day 500: 'Impossible game'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 500.
Today in summary: ANZ vows to implement the “spirit” of the royal commission final report; superannuation consolidation continues with the merger of Equip Super and Catholic Super; and Labor promises a free legal advice service for small business and farmers who are victims of bank misconduct.
-- Alex
@AlexESampson
Current banker panic level: 😰😍🤐
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AMP is headed for yet another showdown at its AGM tomorrow, with some shareholders lining up for a second strike against the embattled wealth management firm’s board. Ahead of the vote, Australian Banking Daily spoke to corporate governance experts, who poured cold water on a push to give shareholders powers on top of the two-strikes rule.
Equip Super and Catholic Super — which were both blasted by the royal commission for poor management and conflicts of interest — will embark on the largest merger of non-government, not-for-profit superannuation funds in Australian history. The funds also came under Hayne’s scrutiny for failing to complete previous merger attempts with other partners. Both companies will retain their individual brands but will combine A$25 billion in assets.
ANZ says its sorry for its pre-Hayne behaviour and has vowed to implement the “spirit” of the royal commission final report. The bank is accepting short-term losses and focusing on paying its dues. When it announced its half-year results today ANZ was proud to have met expectations in a “challenging” post-Hayne environment, revealing a 2% increase in cash profit for the first-half of 2018-19. The bank has shed 2221 employees since the previous corresponding half.
In a market update yesterday, Westpac admitted failings by financial advisers operating under Westpac Banking Corp's licence meant it had to set aside A$510 million to cover repayments, interest and remediation for customers. Westpac said it would continue to work to determine where a payment should be provided, and wouldn't know the final cost until all payments had been made. An update on Westpac’s implementation of the royal commission recommendations is expected on May 6 during the bank’s half-year results announcement.
Labor has promised to establish a free legal advice service for small business and farmers who are victims of bank misconduct. The initiative will fund up to A$10 million a year for four years in free legal advice, with the money coming from Labor’s proposed “fairness fund” — an A$160 million-a-year pot derived from levies on the big banks.
A release from Shadow Treasurer Chris Bowen said small business and farmers had been crying out for legal help for years. The Australian Small Business and Family Enterprise Ombudsman Kate Carnell welcomed Labor’s commitment, saying she supported measures that ensured small businesses had access to justice, particularly in “cases where there's an imbalance of bargaining power”.
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Today’s burn prize: ANZ chief executive Shayne Elliott
“We do accept we could have done a better job implementing our new risk settings and are taking steps to improve processes.”
Elliott said during the bank’s half-year results announcement that the post-Hayne environment was tough and “being more risk averse in the current environment is prudent”.
The Commentariat
Banks clobbered by fines for aiding corruption, money-laundering and sanctions-busting have beefed up their compliance, risk, legal and internal-audit teams, writes The Economist.
“Compliance officers will never be the rock stars of finance, but they have moved from drums to rhythm guitar. And though some banks hint at having reached “Peak Compliance”, staffing and investment are likely to remain well above pre-crisis levels.
“At the end of 2018, some 30,000 (or 15%) of the 204,000 employees of Citi, an American bank, worked in compliance, risk and other control functions—enough to fill more than two-thirds of the seats at Citi Field, the New York Mets’ baseball stadium.”
ANZ chief Shayne Elliott and his management team have made some bad calls when tightening credit standards, writes The Australian’s Richard Gluyas.
“Elliott is not about to turn the credit taps back to maximum throttle by writing loans at 95 per cent of a property’s valuation.
“Instead, he told Four Pillars that 50 more loan assessors had been hired to smooth the flow of applications, now that a higher proportion require manual intervention to verify income and expenses.”
AFR columnist Patrick Commins questions the reliability of market pricing in predicating RBA rate cuts. He argues the nature of buying and selling is that traders tend to want to make a bet one way or the other and that the market is bad at predicting inaction.
“By this time next week close to half of the professional forecasters will have got their May RBA call wrong, a rare sorting of the winners from the losers in the impossible game of predicting financial markets.”
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