Day 556: 'Huge lack of transparency'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 556.
Today in summary: ASIC starts consulting on it plan to ban questionable financial products; ANZ weighed in on the Israel Folau debate; RBA assistant governor Michele Bullock discussed the challenges to faster payments at a conference in Berlin; Afterpay stepped up its response to Austrac; the latest SEEK Salary Review revealed insurance and superannuation employees are accumulating hefty pay raises; Allan Fels announced regulatory actions to curb loyalty taxes across a host of Australian insurance and financial services; and the Financial Stability Board reported reform progress to G20 leaders ahead of the Osaka Summit.
-- Alex
@AlexESampson
Current banker panic level: 🧐😱😡🤑🤑🕵🏻🤓
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ASIC has kicked off consultation on its new powers to ban questionable financial products. The new powers stem from the Hayne royal commission, and while the regulator welcomed the relevant new legislation when it passed in April, it today said it was a “temporary market intervention power” and it would “consult before each and every use”. Submissions responding to the consultation paper close August 7.
Economist Allan Fels today announced regulatory actions to curb loyalty taxes across a host of Australian insurance and financial services. Fels, in his role at the NSW Emergency Services Levy Insurance Monitor, wants insurers to include the price of the previous year’s policy along with the new premium price for all home insurance renewals from July 1. This would allow customers to “shop around” and get the best price and avoid what he has deemed “loyalty taxes”.
Last year Fels published a study which revealed NSW insurance consumers who renewed an insurance policy with their existing insurer paid on average 27% more than new policyholders. Between July 2015 and June 2018 the gap in average total insurance premium fluctuated between A$201 and A$411 per policy, with discounts being offered to attract new customers. The new measures will only apply in NSW, but the monitor said several companies that offered policies across the country had made nation-wide changes.
ANZ has weighed in on the Israel Folau debate, saying it does not “support any views or actions that can be interpreted as supporting homophobia”. This comes after reports ANZ - which is the largest sponsor of Netball NZ - approached the sporting group over Maria Folau’s support of her husband’s fundraising campaign.
Israel Folau is busy raising money for an unlawful termination claim against Rugby Australia after being dismissed for tweeting that gay people would go to hell unless they repented. Folau’s wife shared a link to the fundraiser on Twitter on Friday.
The Financial Services Council has approved a moratorium allowing Australians to get up to A$500,000 of life insurance cover without disclosing any adverse genetic test results. The standard will come into effect on Monday.
FSC Standards are mandatory for FSC members and all companies offering life insurance in Australia are members of the FSC.
RBA assistant governor Michele Bullock told delegates at the Central Bank Payments Conference in Berlin that since going live in February 2018, Australia’s New Payments Platform had increased usage, but still faced barriers.
Bullock said three aspects of the real-time payments platform required a more centralised approach to enhance efficiency and convenience – fast payments, more modern and flexible messaging standards and improvements in resilience of retail payment systems. In May, more than 18 million transactions were processed through the NPP, amounting to more than A$15 billion, up from 16 million transactions in April. Bullock said this was still small relative to the volumes that passed through other retail payment systems.
“But it is growing steadily and at least as quickly as some comparable overseas fast payment services when they were introduced,” Bullock said.
Controversial fintech Afterpay issued an update to the ASX, and also advised it had established a dedicated sub-committee charged with assisting and reporting to the board on the progress of the Austrac audit. The regulator last week ordered an audit of Afterpay’s compliance with anti-money laundering and counter-terrorism financing laws. The fintech is also being scrutinised by regulators for its identification of users.
Co-founders Anthony Eisen and Nick Molnar said they remained “fully committed” to the business.
The latest SEEK Salary Review reveals insurance and superannuation employees are accumulating hefty pay raises. The jobs are at the top of the online jobs board’s list of 20 industries with the biggest pay raises, up 46% between 2011 and 2018.
This comes as banks, wealth managers and insurance firms come under pressure from regulators such as APRA to address their remuneration structure to help prevent the misconduct exposed during the banking royal commission.
Slater and Gordon today filed its class action against wealth manager AMP. Originally announced in early May, the case will be conducted on behalf of more than two million Australians who were allegedly charged excessive fees on their AMP superannuation accounts. Last month Maurice Blackburn also filed a class action on behalf of all AMP superannuation fund account holders over “unreasonable” fees.
Slater and Gordon also has an active class action against NAB and its insurance arm MLC, which was this month expanded to include insurance for personal loans.
The Financial Stability Board — the international body that monitors and makes recommendations about the global financial system — today reported to G20 leaders ahead of the Osaka Summit later this week. Chair Randal K. Quarles hosted a press briefing about the FSB’s four key reform areas, including building resilient financial institutions and the regulatory adoption of core Basel III elements (regulations to build stability in the international financial system).
Quarles also discussed ending the “too-big-to-fail” attitude of major banks. He noted the FSB’s vulnerabilities assessment which investigated concerns around the continued growth of financial intermediation by non-banks, which now accounts for almost half of global financial assets, and questioned whether the existing set of policy tools were sufficient.
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Today’s burn prize: Friends of Earth economic justice campaigner Nisha Skillbeck
“It is high time the Australian government regulated the banks with regards to their human rights and environmental impact overseas.”
Stillbeck’s comments come amid reports that Australia’s big four banks are financing companies accused of land grabs, child labour and land clearing in developing countries. According to a new report by Friends of the Earth Australia, released today, CBA, ANZ, NAB and Westpac had a total financial involvement of at least US$6.4 billion (A$9.5 billion) in six major companies involved in the palm oil supply chain between 2010–2018.
Stillbeck said there was a “huge lack of transparency” for the overseas investments of the big four banks. This comes after APRA announced in March that it was increasing scrutiny of banks, insurers and superannuation trustees over how they managed the financial risk of climate change. ASIC is also encouraging companies to improve climate risk disclosure.
The Commentariat
The government should refrain from negotiating with superannuation funds over reforms, writes Lisa Davies in the SMH.
“Senator Hume has now taken out her big stick. She says that unless the funds can agree to reforms, it would be ‘immoral’ to lift the super guarantee to 12% of wages as is currently legislated. Senator Hume must be prepared to fight this battle even in the face of opposition from some sections of the industry. It makes sense to reform super whether it is at 9.5% or 12%. Doing nothing should not be an option.”
Charles Purcell rejects Mark Zuckerberg’s digital “dollarydoos” and defends cold hard cash, which he argues deserves a better fate than to be “consigned to the dustbin (or sofas) of history”.
“E-currency comes with no cultural history. It pays homage to no nation or movement. Our heads will never appear on its surface; our hands will never touch it. Perhaps our homes might be tidier without unspent five-cent pieces lying everywhere. Yet I would hate to see another thread pulled from the fabric of society by the tap-and-go culture.”
The looming interest-only lending “time bomb” has been defused by lower rates, writes The Australian's wealth editor James Kirby.
“Loan approvals with a LVR in excess of 90% are now less than 7% of all loans. The figures will come as a major relief to regulators who had been trying to rein in interest-only lending by imposing caps on the volume of bank lending.”
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