Day 535: 'Legitimate expectation'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 535.
Today in summary: Industry says a Treasury proposal to increase supervisory levies will hit smaller banks hardest; ANZ’s boss has defended the bank’s decision not to pass on the full RBA rate cut; ASIC head enforcer Daniel Crennan QC has warned big banks not to drag out litigation in the courts; and Australian neo bank Volt is planning to list on the ASX.
-- Alex
@AlexESampson
Current banker panic level: 🤑🤑👮♂️🤑
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A Treasury proposal to increase supervisory levies on banks will hit smaller banks and credit unions hardest, industry says. The move has been met with criticism, including from the Customer Owned Banking Association which said the “dramatic increases” in levies on customer-owned banks and smaller listed banks were harsh. COBA argued the big four had been “gifted” a A$3 million levy reduction while levies for smaller banks had been pushed up more than 25%. The levies are intended to cover higher regulatory costs for the banking regulator APRA following the banking royal commission.
COBA CEO Michael Lawrence said:
“This makes no sense at all given it was the misconduct of the major banks that has prompted the need to increase resourcing for APRA. I urge the Treasurer to intervene and rule out these grossly unfair increases in APRA levies on COBA member banking institutions.”
In a discussion paper released by Treasury on Tuesday, the government said banks, insurers and super funds would be required collectively to pay A$236 million in the 2020 financial year in supervisory levies. Submissions are due June 14.
ANZ chief executive Shayne Elliott has defended the bank’s decision not to pass on the full RBA rate cut announced yesterday, saying it would penalise people who relied on interest income.
RBA governor Philip Lowe last night encouraged people to shop around if they were unhappy with ANZ or Westpac’s failure to pass on the full rate cut.
Minister for Drought David Littleproud said Rabobank, NAB and CBA’s decision to pass on the cut was a victory for drought-stricken farmers.
This comes as the March quarter GDP data, released today, revealed Australia's economy grew by an underwhelming 0.4% in the first three months of the year and 1.8% for the year. This was down from the 1% growth recorded in the March quarter last year.
ASIC head enforcer Daniel Crennan QC has warned big banks not to drag out litigation in the courts. Crennan gave the warning outside court yesterday after the corporate regulator successfully prosecuted former diversified investment company Octaviar chief financial officer David Anderson with 26 counts of fraud for allegedly misappropriating A$4.6 million.
Crennan said the regulator would file more litigation related to last year’s banking royal commission within months and called on the Coalition to pass laws giving it new search warrant and phone tapping powers. He said ASIC was “resolute” about taking legal action.
Australian neo bank Volt Bank is planning a listing on the Australian Securities Exchange with a market value estimated to be about A$400 million. While not fully up and running, the startup has been planning to disrupt the big four banks with its online lending platform. The Australian is reporting Volt told investors during a recent presentation that it would pursue an initial public offering in the middle of next year.
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Today’s burn prize: Treasurer Josh Frydenberg
“I think the ANZ has let down its customers.”
Frydenberg is snippy that despite hearing from Commissioner Hayne “just months ago”, and him yesterday, that some banks had the temerity to continue “putting profits before people”, with ANZ and Westpac failing to pass on the RBA’s rate cut.
“Actions like this don't give the Australian people any comfort that the banks have changed their behaviour. And as Treasurer of Australia, I have made it very clear to the banks that the public have a legitimate expectation that they will see the full benefits of rate cuts such as announced by the RBA.”
The Commentariat
Rate cuts don’t mean a thing, writes The Australian’s senior business commentator John Durie.
“Ironically, in early trade in Australia, all four of the big banks were up but the two which didn’t cut rates as much as the RBA, ANZ and Westpac, were outperforming the other two with 1.6% gains against the 1.2% gain for the ‘good’ banks. The immediate market reaction is dumb when you consider ANZ made it clear yesterday its business is hurting and it has lost market share.”
ANZ and Westpac should have waited for Reserve Bank's message before they announced they would not pass on the central bank’s full rate cuts, writes Stephen Bartholomeusz in the SMH and The Age, questioning whether they would have changed their tune if they had heard governor Philip Lowe’s speech last night.
“Lowe’s highly unusual, and unusually emphatic, declaration that the banks should pass the full reduction in the cash rate through to mortgage borrowers was a clear call for them to relegate their self-interest to the greater good.”
ANZ and Westpac are out on a political limb after shunning rate cuts, writes AFR national affairs columnist Jennifer Hewett.
“The much broader political and economic issue is whether RBA rate cuts can do enough, especially with interest rates already at record lows. Most private sector economists believe the Australian economy has little chance of meeting the RBA’s “central scenario” of 2.75% growth this year and next.”
RBA governor Philip Lowe is ushering in an unprecedented era of ultra-easy monetary policy by cutting rates to historic lows, writes AFR’s senior economics and business writer John Kehoe.
“The RBA governor’s epic aim is to drive down unemployment towards 4% in the hope that a tighter labour market can fuel pay rises and lift subdued inflation back into the 2-3% target range. Lowe is placing faith in the recent United States experience that a tighter labour market can spark healthy wage growth and upward price pressure.”
ANZ boss Shayne Elliott’s halo is starting to slip, writes business correspondent Richard Gluyas in The Australian.
“Apart from Tuesday’s call on rates, the rival pointed to an aggressive position on branch closures, the collapse in negotiations with Australia Post over a fee increase to preserve post office banking services for ANZ customers, and opposition to the Morrison government’s proposed business growth fund.”
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