Good afternoon, and welcome to day 562.
Today in summary: ANZ moves quickly after the RBA cuts interest rates to 1%; the ABA reckons APRA should continue to set serviceability assessments for lenders; Afterpay is shaking up senior management and working toward an independent board; and Splitit has signed online retailer Kogan as its first major Australian retail partner.
-- Alex
@AlexESampson
Current banker panic level: 😧😏🤑🤑
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At its meeting today, the RBA board decided to lower the cash rate by 25 basis points to 1% — the first consecutive rate cut in 10 years. This follows a similar reduction at the June meeting, where the rate was cut from 1.5% to 1.25% — the first rate cut in three years.
“This easing of monetary policy will support employment growth and provide greater confidence that inflation will be consistent with the medium-term target,” the RBA said.
Yesterday Treasurer Josh Frydenberg said “we do expect the banks to pass on in full to the Australian people the benefits of sustained reduction in their funding costs”. Last month CBA and NAB passed on the full cut whereas ANZ (0.18%) and Westpac (0.20%) passed on a reduced cut.
This time ANZ passed on the full cut for its variable interest rate home loan customers. The rest are yet to respond.
AFR | The Australian | SMH | ABC
The Australian Banking Association has made a submission to APRA’s revised draft mortgage lending guidance.
In May APRA began consulting on possible revisions to its guidance on the serviceability assessments for lenders. APRA has proposed removing its guidance that ADIs should assess whether borrowers can afford their repayment obligations using a minimum interest rate of at least 7%. Instead, lenders would be permitted to review and set their own minimum interest rate floor for use in serviceability assessments.
Last month Westpac went ahead and changed its minimum interest floor to 6.5% from 7.25%, effective immediately, without approval from APRA. It backflipped immediately.
The ABA reckons APRA should continue to set a regularly reviewed buffer.Afterpay has appointed non executive director Elana Rubin as its interim chair, replacing co-founder Anthony Eisen, who has become CEO and managing director. former PayPal MD Frerk-Malte Feller has joined the buy-now, pay-later company in a newly created role of global chief operating officer. Co-founder Nick Molnar will become global chief revenue officer and will continue as an executive director on the board.
Afterpay said it was committed to “evolving the composition and independence of its board” to reflect the company’s expanding global operations.
The group has faced criticism for its lending approach and is being investigated by Austrac over compliance with anti-money laundering laws.
US-based buy-now, pay-later service Splitit has signed up online retailer Kogan as its first major Australian retail partner.
Gil Don, chief executive of the New York-based firm, said the relationship with Kogan aligned with Splitit’s strategic vision of partnering with Australia's largest retailers.
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Today’s burn prize: Anthony Baum, founder and CEO of automated home loan application platform Tic:Toc
“That doesn’t hold water because we’ve been doing it from 2017. If a fintech from Adelaide can do it, then why can’t a major bank?”
Baum said claims from the big banks that accurate validation of customer expenses was too difficult or not feasible were rubbish. This comes as the big four resist changes to responsible lending requirements that may require more accurate verification of household income and expenses.
The Commentariat
Reserve Bank rate cuts are a sideshow, writes John Durie in The Australian.
“The first consecutive official rate cuts for over a decade highlight the plight of the Australian economy, and the only hope for Reserve Bank boss Philip Lowe is that by now, Treasurer Josh Frydenberg will have got the message and that he acts on long-term reform.”
RBA rate cuts keep us all in debt, argues AFR columnist Patrick Commins, saying rates could lower further next year. Commins believes this is cause for concern because cheaper credit was responsible for our “historically high household debt” and “sky-high property prices”.
“In Australia, the property boom has been more spread across income groups, and so has not made inequality the hot button issue it has overseas. Intergenerational inequity, however, will increasingly play a role in upcoming elections. Of course, this might all be rendered academic should we find ourselves deleveraging in a more explosive fashion: via a property market collapse and forced defaults.”
Customer loyalty has been repaid with “sneaky insurance” fee rises, writes Allan Fels - NSW's Emergency Services Levy Monitor - in the SMH. Fels has brought in new laws to stop what he called a “loyalty tax” from insurers.
“This loyalty tax occurs when discounts are offered to attract new customers but premiums are increased at the first and subsequent renewals. This practice, in my opinion, is deceptive because customers aren’t told. It falls short of community expectations of the kind that the Hayne royal commission said we should expect of financial institutions.”
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