Friday, April 8, 2016

Pressure ramps for Royal Commission into bad banking behaviour

Pressure is continuing to ramp up for a Royal Commission into unethical banking behaviour.

The Opposition Leader Bill Shorten wants the government to consider the option while some Coalition and Labor backbenchers think it's the only way of getting to the truth.

Liberal MP Warren Entsch says Australians have lost faith in the integrity of the banking system, accusing banks of "bastardry and blackmail".

Mr Entsch's comments follow similar calls from Nationals senator John Williams and Labor senator Sam Dastyari.

Listen to my report from The World Today broadcast on the ABC.

Thursday, April 7, 2016

Bank of Queensland surprises customers with rate hike

Bank of Queensland cites tougher regulatory requirements for announcing a rate increase on owner-occupied and investor home loans from 15 April.

Listen to my report from The World Today on the ABC.

Older and casual workers in Aust more vulnerable in mass layoffs, warns OECD

Older workers and casual and part-timers are more likely to be laid off as Australia's manufacturing industry continues to shrink, according to a global report out this morning.

The warning comes from the Paris-based Organisation for Economic Cooperation and Development (OECD) which says older Australians struggle the most to find a new job which is usually much lower paid.

The OECD's call to improve services for laid off workers comes as the steel maker Arrium announced it was going into voluntary administration, putting the future of its Whyalla steel operations in further jeopardy.

The author of the OECD's study into Australian layoffs, Christopher Prinz, told the ABC's AM program that better employment services were needed for laid off workers, in particular older ones.

"It's not only older people who are affected but what we do still continuously find is if it is older people who are laid off, they have a much harder time to find back into the labour market," Mr Prinz said.

"These are people who have had good jobs for a long time and all of a sudden, unprepared, they need to find a new job and that is not straight forward."

The OECD's report comes as local manufacturing remains under pressure, especially with the Australian dollar remaining well above 70 US cents despite official interest rates at the historic low of two percent.

The concerns also coincide with the demise of Australia's car industry as Holden, Ford and Toyota prepare to close local operations over the next two years.

"These are exactly the cases in which some policies are in place to help people who lose their jobs because of bigger restructurings and the big mass layoffs," Mr Prinz said.

"We are getting older and older the age from which you are considered like an older worker hasn't really changed but partly it is to do with the fact that there are people who have been out of the education system nevertheless for 25 years and therefore, of course, given how fast things develop, their skills might be outdated."

The OECD report says the current flashpoints in Australia include manufacturing and the forestry industry in Tasmania.

Mr Prinz told AM that laid off workers needed special services from government to unsure that are appropriately skilled for new roles.

"I think it's really about anticipating change, about preparing people for change, about up skilling people all the time not only once they have lost their jobs".

Wednesday, April 6, 2016

Westpac to "vigorously defend" rate rigging allegations; trader says actions "completely wrong"

Westpac has become the latest of big four banks to become embroiled in a financial scandal.

The corporate watchdog ASIC is taking Westpac to court alleging it rigged a key market interest rate over a two year period - another dent in the credibility of the banking sector.

The scandal confronting Westpac follows similar rigging allegations recently levelled at the ANZ while the Commonwealth Bank is in damage control over unethical behaviour at its insurance arm, CommInsure.

It sounds like financial jargon but the bank bill swap rate, or the BBSW, is the rate set in a five minute window every day that determines what banks charge to lend to each other.

For banks it can mean hundreds of millions or billions of dollars in profit. For regular people it sets benchmark rates on corporate loans, business loans, mortgages and credit cards.

Listen to my report from this morning's edition of AM

The corporate regulator ASIC alleges Westpac manipulated the BBSW for two years between April 2010 and June 2012.

In a statement of claim filed with the Federal Court ASIC accused Westpac of a pattern of behaviour that amounts to unconscionable, misleading and deceptive conduct.

Source: ASIC statement of claim 

Westpac's trading had the effect or likely effect of causing the 30 day BBSW to set at a rate which did not reflect genuine forces of supply and demand and of creating an artificial price.

ASIC interviewed around 50 Westpac staff and cites recorded telephone conversations illustrating the high stakes pressure on traders who allegedly push the limits, including this one from Colin Roden, Westpac's managing director of group treasury who is quoted as saying he "knew it was completely wrong":

Source: ASIC statement of claim

The Westpac allegations follow similar action ASIC is taking against the ANZ Bank over the alleged rigging of the bank bill swap rate.

The National Australia Bank and the Commonwealth Bank have been damaged in unrelated scandals involving unethical financial planning, while the CBA is reeling from claims of unethical behaviour at its insurance arm, CommInsure.

Westpac has responded cautiously and says it will vigorously defend itself against ASIC's rate rigging allegations.

Source: Westpac statement 

Nationals Senator John Williams has been crusading against the big banks since his election in 2008 and he says a royal commission into banking bad behaviour is now critical.

"When I was a young fellow back in the 70s, when I first started work, the bank manager was probably the most trusted person in your town and community. I don't think that's the case today," Senator Williams told the ABC's AM program.

"As time goes by the case builds stronger and stronger in my opinion for a royal commission into the finance sector.

"My concern is the culture is simply profit, profit, profit and to hell with the customers".

Tuesday, April 5, 2016

APRA boss says no room for complacency about new GFC

The chairman of the Australian Prudential Regulation Authority has warned Australia should not be complacent about its ability to dodge another global financial crisis.

Wayne Byres told a conference in Sydney that after the build-up to the Wall Street meltdown in 2008, the regulator is now more active and prepared to intervene.

Mr Byers, who was not APRA chairman until 2014, had a sombre reality check about his mission to maintain a resilient banking system in Australia as the fallout from the GFC continues to resonate around the world.

"We shouldn't kid ourselves that the worst of the problems elsewhere couldn't occur here or that there hasn't been a healthy dose of luck involved," Mr Byres said.

"We can't be complacent. After 25 years of economic expansion, it would be a surprise if the banking system wasn't in good shape.

"But put simply, when adversity arrives - and at some point it will - we want the banking system to help alleviate rather than exacerbate problems. Ideally it’s a shock absorber not an amplifier."

Mr Byres also responded to last night's 7.30 program which revealed secret APRA documents from 2007 show that lax lending standards by banks could have could a serious question or a banking crisis.

In response to questions from the ABC, Mr Byres signalled the regulator had ramped up its supervision of bank lending standards between 2007 and now saying some of the issues were "eerily similar".

"I don't think the issues were all that different but broadly speaking the issues that were on the radar screen then - buoyant housing lending, commercial property lending standards - are all things that are on our agenda again.

"This time around we've been a bit more active and interventionist maybe than we were last time but I don't think the issues have particularly changed that much."

The former Treasury secretary, now chairman of the National Australia Bank, Ken Henry agreed Australia remained exposed to a new global shock.

And he revealed that in scenario planning in the lead up to the Wall Street collapse, the potential meltdown of the global financial system was not seen as a real possibility and that being locked out of financial markets was the main concern.

"We asked ourselves the question -  in what circumstances could that worry cause a real problem for Australia. And we came up with one and we thought it was so left field that there was no point worrying about it," Mr Henry told the conference.

"And you know what it was? A meltdown of the global financial system.  This remains a risk for Australia and our best protection is a strong public sector balance sheet, that's our best protection."

Monday, April 4, 2016

Lifestyle expectations exceed economic reality, MLC survey shows

With the government likely to make tough decisions on superannuation in next month's Budget, more Australians are worried they won't be able to pass on today's lifestyles to their children.

A survey by the National Australia Bank's wealth arm MLC shows almost two-thirds of Australian believe the next generation will never be able to buy their own homes.

Around half of the two thousand people surveyed don't think they can sustain their own standard of living in a decade's time and a fifth are relying on a family inheritance to pay off their mortgage.

MLC chief executive Andrew Hagger says expectations that future generations will do better than today's taxpayers is fast fading.

"We know that maintaining our lifestyle and financial security are our top priorities for Australians. However, Australians are telling us they are worried," Mr Hagger said.

"There has always been the expectation that future generations will do better than us. Yet these findings paint a different picture. It's concerning to see so many people worried about how their children will afford their own homes and live a comfortable lifestyle."

The MLC survey shows:

* two-thirds of Australian parents don't believe their children won't achieve the same lifestyles as them

* almost 1 in 5 Australians are relying on the family inheritance to pay off their mortgage

* more than a third of Australians believe they will be relying on the Australian government during retirement

MLC's general manager of corporate super Lara Bourguignon says the research indicates the lifestyles of the baby boomer generation are no longer sustainable.

"The cost of living and the mortgage absolutely rule our financial lives," Ms Bouguignon told the ABC's AM program.

"Many worry that today's young people will struggle to build the same kind of life that their parents generation has enjoyed."

Ms Bouguignon said that without structural change and lower expectations, standards of living could slide over time.

"Twenty years of economic prosperity has been led by the mining boom. Australians are aware the mining boom has tapered out and they're not yet confident where that next wave of growth is coming from."

Ms Bouguignon says the federal government needs to confront hard decisions in the May 3 budget and that the funding of retirement needs to be a national priority.