Day 520: 'Talking up reform'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 520.
Today in summary: APRA has proposed lenders set their own minimum interest rate floor; IOOF is worried providing documents for one court case will lead to another; AMP could be up for a A$1 million civil penalty after it admitted wrongdoing; and AIST says new research illustrates the urgent need for an online tool to rank super fund performance.
-- Alex
@AlexESampson
Current banker panic level: 🤩🤐🤫🧐
Please don’t keep The Inquisition to yourself. Forward this email to your colleagues and encourage them to sign up for free here.
APRA has kicked off a four-week consultation on the proposal that lenders set their own minimum interest rate floor. The regulator’s proposed revisions to the prudential practice guide on residential mortgage lending suggest ditching a rule that meant all new mortgage customers were assessed on their ability to manage repayments with 7.25% interest rates.
APRA chair Wayne Byres today wrote to lenders saying the old policy may be out of date. Byres said while the changes were likely to increase customers’ maximum borrowing capacity, they were not intended to signify that less importance would be given to sound lending standards. Property lobby group Urban Taskforce said the change would help the supply of new housing.
The Australian | AFR | SMH | ABC
IOOF is worried providing documents for a current court case will lead to another. IOOF's former chairman, George Venardos, has raised concerns that materials provided in response to APRA’s lawsuit to ban IOOF wealth managers from operating, could be used in separate regulatory action by ASIC. ASIC has not yet not launched legal action against IOOF or its directors.
AMP could be up for a A$1 million civil penalty after it admitted wrongdoing in an ASIC lawsuit. The embattled financial services group admitted it failed to provide appropriate advice or act in clients’ best interests ahead of a three-day court case in June. AMP still faces ASIC action for allegedly misleading the regulator and charging fees for no service.
AFR | The Australian | ABC
Confusion holds back members of cruddy super funds from swapping to a better service, new research shows. The research – commissioned by the Australian Institute of Superannuation Trustees and conducted by Essential Media – looked at the decision-making process of members of bank-owned retail funds. It found many retail fund members were unsure how their fund was performing and one in four mistakenly thought they were in an industry fund.
AIST said the research pointed to the urgent need for a government-sanctioned online tool to help Australians make more informed choices. The Superannuation Consumers’ Centre previously told Australian Banking Daily that ranking systems did not have an impact on disengaged savers, and that the focus should be on improving systems that allowed poor fund performance.
🔥🔥🔥
Today’s burn prize: AIST CEO Eva Scheerlinck
“Many Australians are languishing in poorly-performing super funds with no easy way of knowing that their fund is a dud.”
Scheerlinck said while standardised reporting had been introduced for MySuper default funds, it was difficult, if not impossible, to compare funds in the non-default (so-called Choice) sector. She today called for a government ranking system to help advise fund members on their fund’s comparative performance.
The Commentariat
Industry super funds are bracing for an attack from the Coalition, writes The Australian’s John Durie. The attack could come in the form of a formal end to plans to increase the superannuation guarantee from 9.5% to 12% by 2025, Durie posits, pointing out the Liberal Party has never “philosophically” been a big fan of compulsory superannuation.
“The market reaction yesterday across the board will be short-lived but is based on the government’s track record of talking up reform more than actually doing anything meaningful. The main game is to change the default allocation to break the nexus between union awards and superannuation. Which makes sense, but the reality is that big industry funds like AustralianSuper can out-market the retail funds on the basis of the superior returns and better management and governance.”
Open banking is at the top of fintechs’ wish lists following the election, writes FinTech Australia general manager Rebecca Schot-Guppy in The Australian. She argues the Consumer Data Right paves the way for the biggest opportunities in financial services but had been lost in the election cycle, with the big banks stalling their implementation as they wait for the returned government to pass the necessary legislation.
“We ask the Morrison government to continue to make Open Banking a priority while in office, and to push forward a reform that directly acts on the recommendations of the banking royal commission and will leave millions of Australians better off.”
This is an introductory service while we’re building a comprehensive daily paid online publication, coming soon.
We’re not here to offer opinion, simply to cut through the noise, and help you make sense of the emerging policy and market trends you need to be across. We call it pure intel. You can read more about us here.