Day 522: 'Completely delusional'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 522.
Today in summary: The big banks have been chastened by Hayne; financial adviser standards body FASEA has launched a new approval process for foreign qualifications; ASIC is thinking about using its new product intervention powers; and credit cards, buy-now, pay-later schemes and online gambling are causing growing financial difficulty for young people.
-- Alex
@AlexESampson
Current banker panic level: 😇🤓😓😱
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The big banks have been chastened by the Hayne royal commission, with Westpac Group today revealing it was planning an overhaul of lending to the self-employed. New measures will include a review of income, expenses and superannuation. Meanwhile ING and Teachers Mutual Bank have warned borrowers they are raising the rate at which they assess credit-card debit. NAB is conducting a review of almost 300 of the bank’s products, including products it no longer sells but still are used by customers.
To meet new standards of the Corporations Act, financial advisers holding a foreign qualification are required to apply to FASEA for approval of their qualification. The move is part of an overhaul of basic minimum education requirements for financial advisers.
FASEA today released its online Foreign Qualifications Assessment Service form, which requires the applicant to provide an assessment of their qualification by a Department of Education and Training approved body, as well as a certified copy of an academic transcript of the qualifications. FASEA may specify courses for the new entrant or existing adviser to complete in addition to their foreign qualification.
ASIC is thinking about using its new product intervention powers to ban or restrict the sale of risky financial products, markets executive director Greg Yanco told the Stockbrokers And Financial Advisers Association conference in Sydney today. This would include binary options, margin foreign exchange and contracts-for difference from fixed income and foreign exchange traders. Yanco said the regulator would consult with industry before making a decision to invoke its powers, but urged traders to “lift their game”.
Credit cards, buy-now, pay-later schemes and online gambling are causing growing financial difficulty for youngsters, Financial Counselling Australia researcher Mia Shelton told the FCA conference in Melbourne today. Shelton said the problems were “very real” and were gaining traction because companies used social media to market themselves.
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Today’s burn prize: Growth Street (UK) CEO Greg Carter
“Banks talk a good game on open banking, but the raw data shows a very different picture.”
Carter said some banks were not doing all they could to make open banking a success, with new data showing the scheme was only available 83% of the time in the UK in the first quarter of 2019.
The Commentariat
Companies, markets and the economy commentator Elizabeth Knight writes in the SMH that interest rate cuts are great for borrowers, but not for the banks. She argues banks make better margins when interest rates are rising and are squeezed when rates fall.
“Talk to any bank executive and they will tell you that funding costs remain under pressure. This is code for - the cuts won’t be fully passed on. Undoubtedly, it will be difficult to cut deposit rates much further from this historically low point. The banks are well down the track in moving to a much tougher expense verification process. And that momentum probably won’t be altered even if APRA loosens lending criteria.”
The grounds for another financial crisis may be brewing, and bundles of securitised sub-prime loans, labelled as collateralised loan obligations (CLOs), are to blame, writes Stephen Bartholomeusz in the SMH.
“The Fed and the G20-sponsored Financial Stability Board are trying to determine the size of the leveraged loan market globally and identify its investors so that they can understand the risks. Without that knowledge, regulators can’t say with any certainty that leveraged lending and CLOs don’t pose a risk to financial stability, nor can they understand the nature of the potential risks, like losses, or illiquid markets or runs on institutions with exposures to the loans and securities.”
The moment to fix the housing crisis has now passed, writes Jessica Irvine in the SMH. It was the moment when Australian’s voted to “protect the Great Australian Dream: namely, our collective commitment to leveraging heavily into property ownership”.
“On top of the defeat of Labor’s proposed changes, the banking regulator on Tuesday announced that it will relax the stress test lenders must apply to potential borrowers. And history shows that when Australians are allowed to borrow more, we do so, pushing up house prices in the process.”
Banks, super funds and insurers face regulatory pain over governance weakness, writes business correspondent Richard Gluyas in The Australian.
“The key finding in the Australian Prudential regulation Authority’s damning review of governance self-assessments by 36 of the nation’s top financial institutions is that some blue-chip boards are completely delusional about the depth of the challenges they face.”
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