Westpac has announced the appointment of its new non-executive director and chairman-elect, who will play an integral role in the appointment of a permanent CEO following the resignation of Brian Hartzer. Via Australian Broker.
John McFarlane, scheduled to assume the
role in February subject to regulatory approvals, will succeed Lindsay
Maxsted and work closely with Peter King, current acting CEO.
McFarlane has more than 44 years’
experience in financial services, across retail and wholesale banking
and markets, as well as in life and general insurance.
“This experience, coupled with his strong
customer and employee focus, will be invaluable to Westpac as the
organisation executes its strategy and implements its Response Plan for the AUSTRAC Statement of Claim,” said Maxsted.
“As chairman-elect, McFarlane will be
responsible for appointing a permanent CEO, with an internal and
external search process currently underway. In the interim, he will work
closely with the acting CEO, Peter King and the board, to effect needed
change.”
Most recently, McFarlane was chairman at
Barclays in London over “the decade of challenge” following the global
financial crisis.
“During his four years as chairman, the
company was streamlined, repositioned and has sustainably returned to
profit,” Maxsted said.
“Prior to this, he delivered a successful turnaround program at UK insure,r Aviva, a company similar in scale to Westpac.”
McFarlane also possesses a “deep
understanding” of Australia’s banking sector, given his previous 10-year
tenure as CEO of ANZ from 1997 to 2007, as well as 10 years passed as
director of the Australian Bankers’ Association.
The newly named chairman has returned to live in Australia permanently and has dubbed the appointment “an honour”.
“People close to me know that on my return
to Australia, I hadn’t intended to take another major leadership role.
However, I’m passionate about the Australian banking sector, and I’m
excited by the challenge of returning Westpac to its place as a leading
global bank, following recent events,” McFarlane said.
“To some extent, the internal and external
challenges ahead for Westpac are not dissimilar to those in my last
five financial institutions, and I have therefore grown comfortable
about my capacity to work with the board and management to effect the
necessary change.
“Nevertheless, I’m sufficiently
battle-hardened to realise things can be tougher than you think and that
in banking, nothing is ever certain.”
McFarlane has communicated that the appointment of a “world-class” CEO can take time.
“In the interim, momentum is important. I
will work closely with Peter King and the board to continue to make any
changes necessary. People should expect to see positive change during
this period,” he said.
“My focus initially will naturally be on
resolving the company’s current issues but equally important, to
position it as quickly as possible for long-term success. Fortunately,
Westpac has wonderful core customer franchises, each with significant
opportunity.”
Westpac has announced that for one year, it will cover the mortgage repayments of home loan customers who lost their principal place of residence due to the bushfires raging across the country, paying up to $1,200 per month per customer. Via Australian Broker.
Westpac’s Bushfire Recovery Support
Package also includes interest free home loans to cover the gap between
insurance payouts and construction costs for consumers who need to
rebuild, as well as $3m in funds allocated to bushfire emergency cash
grants, of which eligible retail customers can claim up to $2,000.
At the time of writing, the bushfires have
claimed the lives of 28 people across the country, with over 3,000
homes destroyed or damaged in New South Wales alone.
“These initiatives are designed to provide
practical, on the ground support for our customers, our people and for
those who are caring for affected communities,” said Peter King,
Westpac’s acting CEO.
The relief package also makes grants of up
to $15,000 available to assist small businesses with the cost of
refurbishing premises that have been damaged or destroyed during the
bushfires.
Westpac has committed to “fast tracked”
credit approvals to provide short-term assistance to businesses impacted
by the fires, as well as offering 2.83% three-year variable rate,
low-interest rebuilding loans.
Further, no foreclosures will be made for
three years on any farming businesses in the affected areas, and all
volunteer firefighters across the nation are able to access the Disaster
Relief Package.
FBAA managing director Peter White has
encouraged brokers to be aware that it’s not only clients who have lost
their properties that are unable to meet their mortgage repayments;
while that subsection may be the most likely to automatically speak to
their lenders and insurers, there are many others whose properties were
not touched by fire but have been impacted in other ways.
“There will be those who have had to
evacuate, or who may operate a small business that has seen a dramatic
drop in revenue because an area has been blocked off. There will be
others who have had to sacrifice their earnings to help friends, family
or their community,” White said.
“Lenders are currently allowing people to
momentarily stop their repayments, and while each situation is
different, they are listening and helping and working with all
borrowers.”
According to White, brokers are ideally positioned to have the most impact on and support damaged communities.
“Chances are the bank won’t come knocking
on our clients’ doors because they don’t know who is being impacted and
who isn’t, but we can knock on those doors,” he said.
“Finance brokers are part of local
communities and we know many of our clients and their families
personally, so this is a great opportunity for us to serve our clients
and repay the trust they have in us.”
Following the monumental Conservative election victory, now is the time for the economics to work through. Mark Carney is due to leave his post as governor of the Bank of England at the end of January after six and a half years in charge, and the chancellor, Sajid Javid, will be choosing a replacement soon – perhaps before Christmas. Via the UK Conversation.
This will be a pivotal decision for the
chancellor – no doubt in close consultation with Boris Johnson and his
advisers. Whoever they pick should not expect a honeymoon period. They
are arriving against the backdrop of Brexit, widening regional inequality and the prospect of a downturn in the global economy.
The frontrunners are said to be Minouche Shafik, director of London School of Economics; Kevin Warsh, a former top official at the US Federal Reserve; and Andrew Bailey, chief executive of UK regulator the Financial Conduct Authority. Add to these names Jon Cunliffe and Ben Broadbent,
both currently deputy governors at the Bank. Behind this sits a couple
of more alternative candidates: Santander chair and former Labour
minister Shriti Vadera and Boris Johnson’s former economic adviser, Gerard Lyons.
An alternative governor may be just the
required medicine at present, since there is a strong case for someone
willing to think differently about central bank management. With
interest rates still very low in the UK and most other developed
economies, there are widespread concerns that central banks will be unable to fight another downturn using the classic response of cutting rates.
Beyond this, there are arguments for
revising the entire model of central banking. In recent years, the trend
has been for them to manage rates without any political interference
and to concentrate purely on keeping inflation low. Indeed, it is almost
30 years to the day since the Reserve Bank of New Zealand became the first central bank to make inflation the sole priority.
In times of inflation, this system made sense. But since the 2007-08 financial crisis, the world has found itself in a situation where economic growth is much weaker and deflation is more of a risk than inflation.
The Bernanke exception
As former Federal Reserve chair Ben Bernanke said in a speech in Tokyo
in 2003, “in the face of inflation … the virtue of an independent
central bank is its ability to say ‘no’ to the government”, but with
protracted deflation of the kind that has continually dogged Japan, “a more cooperative stance” by central banks towards the government is required.
His argument was essentially that it’s
hard to sustain inflation by manipulating interest rates, and that
you’re more likely to be successful using the fiscal levers of
government spending and tax cutting. The same approach is arguably required in the UK today and across the developed world.
Having lost the ability to properly
stimulate the economy using interest rates, the Bank of England and
other central banks have taken it in turns to resort to quantitative
easing – essentially creating money with which to buy mainly government
bonds from banks and other financial institutions. This was supposed to
drive extra liquidity into the economy, but mainly it has just been used
to bid up prices in the likes of the bond market and stock market and
exacerbate the wealth gap.
As an alternative, some commentators are now touting “helicopter money”:
this would involve central banks creating money that would be handed
straight to the public via government tax cuts or public spending – thus
requiring them to coordinate their policies in a way that does not
happen at present.
This could be pursued in conjunction with a novel concept called “modern monetary theory”,
which envisages government targets to boost demand and inflation
financed by a disciplined central bank that keeps interest rates at
zero. We are already seeing signs of the government moving in the same
direction by shifting away from austerity towards more generous spending.
As for the Bank of England’s own targets,
greater policy cooperation with the government would provide wiggle room
for focusing beyond inflation. In particular, the Bank could play a
role in addressing regional inequality. The UK already has the one of the worst rates
of regional inequality in the developed world, with areas like the
north of England and West Midlands bringing up the rear. This will be heightened by leaving the EU, since these same areas are key to international supply chains and expected to be the worst hit.
The answer is for the government to pursue
an industrial policy that aims to improve productivity in regions where
it is weakest, through the likes of targeted tax breaks and economic
development zones, with an accommodating Bank of England providing the
funding to facilitate.
More productive areas attract more capital, which is the reason behind
the north-south divide in the first place. Such an industrial policy
would encourage more investment in these areas, produce real-wage
increases, boost local demand and stimulate regional development. In
short, it would help counteract the impact of Brexit.
Long-term thinking
Two central criteria for the appointment
of the next Bank of England governor stand out. First, they must
understand the deeper economic and social circumstances that have led to
Brexit and the UK’s shift to the right. They must act as governor for
the whole country and not just for London plc: a move away from focusing
on smoothing short-term fluctuations towards prioritising long-term
growth.
Second, the job specification for the next governor says that the candidate should have “acute political sensitivity and awareness”. This might suggest that the government does not want another governor with such outspoken views on say, the economic risks from Brexit. Be that as it may, policy coordination needs to be a priority. I don’t rule out the possibility of the leading candidates being able to work like this, but I worry that they will be too orthodox for the challenge. The government should recognise the shifting sands in central bank policy and appoint someone who is willing to lead from the front.
Author: Drew Woodhouse, Lecturer in Economics, Sheffield Hallam University
Nonbank online lenders are becoming more mainstream alternative providers of financing to small businesses. In 2018, nearly one-third of small business owners seeking credit reported having applied at a nonbank online lender. The industry’s growing reach has the potential to expand access to credit for small firms, but also raises concerns about how product costs and features are disclosed. The report’s analysis of a sampling of online content finds significant variation in the amount of upfront information provided, especially on costs. On some sites, descriptions feature little or no information about the actual products or about rates, fees, and repayment terms. Lenders that offer term loans are likely to show costs as an annual rate, while others convey costs using terminology that may be unfamiliar to prospective borrowers. Details on interest rates, if shown, are most often found in footnotes, fine print, or frequently asked questions.
The report’s findings build on prior work,
including two rounds of focus groups with small business owners who
reported challenges with the lack of standardization in product
descriptions and with understanding product terms and costs.
In addition, the report finds that a number of websites require prospective borrowers to furnish information about themselves and their businesses in order to obtain details about product costs and terms. Lenders’ policies permit any data provided by the small business owner to be used by the lender and other third parties to contact business owners, often leading to bothersome sales calls. Moreover, online lenders make frequent use of trackers to monitor visitors on their websites. Even when visitors do not share identifying information with the lender, embedded trackers may collect data on how they navigate the website as well as other sites visited.
ASIC says that the Federal Court of Australia has today ordered Westpac Banking Corporation to pay a penalty of $9.15 million in respect of 22 contraventions of section 961K of the Corporations Act (the Act), and to pay ASIC’s costs of the proceeding.
The court case relates to poor financial
advice provided by a former Westpac financial planner, Mr Sudhir Sinha,
in breach of the best interests duty and related obligations under the
Act. Westpac is directly liable for these breaches, which attracts a
significant civil penalty, because the law imposes a specific liability
on licensees for the breaches of their financial advisers.
The decision comes as a result of civil penalty proceedings brought by ASIC against Westpac in June 2018 (18-175MR).
ASIC’s investigation revealed internal Westpac reviews, including an
internal bank investigation in 2010, had raised concerns about Mr
Sinha’s compliance history yet he continued to receive several ‘high
achievement’ ratings from Westpac. It was not until 2014 that Mr Sinha
was dismissed by Westpac and March 2015 that Westpac reported Mr Sinha’s
conduct to ASIC.
The trial took place before Justice Wigney
in April 2019, during which Westpac admitted that, as Mr Sinha’s
responsible licensee, it had contravened the Corporations Act. The exact
number of contraventions and penalty that should be imposed were
contested by ASIC and Westpac.
In its decision, the Court found Mr Sinha
failed to act in the best interests of his clients, provided
inappropriate financial advice, and failed to prioritise the interests
of his clients, in four sample client files identified by ASIC. Westpac
is directly responsible for the breaches of the best interests
obligations by Mr Sinha under section 961K of the Act.
‘Westpac, as Mr Sinha’s
responsible licensee, failed to properly monitor and supervise Mr Sinha
for a period of time. This meant his customers were not provided with
advice in their best interests. ASIC brought this case as a result of
Westpac’s suspected contraventions of the law and failures to observe
its duties. The court has found that Westpac contravened the law in this
regard’ ASIC Deputy Chair Daniel Crennan QC said.
In the judgment, Justice Wigney observed:
‘The
relationship between Westpac and Mr Sinha was structured so that Mr
Sinha was able to share in the commissions and fees earned or derived
when, as a result of his advice or recommendations, clients signed-up
for financial products in which Westpac or associated companies had an
interest. As will be seen, that rather cosy arrangement turned out to
be fruitful for both Mr Sinha and Westpac, but not always for their
clients.
…
Unfortunately
for four couples, it was subsequently discovered that the
recommendations that Mr Sinha made, and the circumstances in which he
made them, were deficient and defective, both as a matter of process and
in substance. That should not have been a complete surprise to Westpac
because Mr Sinha’s less than satisfactory conduct as a financial
adviser had previously come to the attention of certain senior officers
of Westpac as a result of various internal compliance reviews, audits or
investigations.’
His Honour further found that Westpac
ought reasonably to have known, from 1 July 2013, that there was a
significant risk that Mr Sinha would not comply with the best interests
obligations and that it failed to do all things necessary to ensure that
the financial services covered by its licence are provided efficiently,
honestly and fairly, and to comply with financial services laws. In
doing so Westpac also contravened sections 912A(1)(a) and (c) of the
Act.
Justice Wigney noted:
‘Westpac
also stood to gain from Mr Sinha’s actions. That perhaps explains why Mr
Sinha was permitted to continue as Westpac’s representative and partner
despite the serious compliance breaches which were exposed by the 2010
investigation. It is tolerably clear that, at least prior to the
commencement of the FoFA reforms, some officers or employees at Westpac
were either unable or unwilling to terminate the services of a
representative who achieved high achievement ratings and was plainly
proficient and successful at promoting the financial products of Westpac
and its associates. It may readily be inferred that Westpac’s
compliance systems and practices were less than rigorously applied, at
least in Mr Sinha’s case.’
The Bank of England released a discussion paper and scenarios for the finance sector to consider the risks of climate change (whatever the cause). They conclude that financial assets are at risk and these risks need to be recognised and accounted for.
The Australian Prudential Regulation Authority (APRA) has published a document outlining its governance arrangements, along with accountability statements for its senior executives.
The paper, titled Governance and Senior Executive Accountabilities, describes APRA’s internal governance and accountability arrangements and is supported by individual accountability statements for senior executive roles and an accountability map. The accountability statements cover all four APRA Members, as well as APRA’s six Executive Directors, APRA’s Chief Risk Officer and Chief Internal Auditor.
Today’s release responds to recommendation 6.12 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry: that “each of APRA and ASIC should internally formulate and apply to its own management accountability principles of the kind established by the Banking Executive Accountability Regime (BEAR).”
APRA accepted the recommendation and committed to meeting it by 31 December 2019.
Steve Weston, fresh back from 4 years with Barclays in the UK
was listening to the May 2017 budget speech, and his world changed. The budget
contained a plethora of banking reforms, including Open Banking, big bank
levies, the BEAR (cultural reform) and the potential to allow new Fintech bank
start-ups an on-ramp in terms of regulation and capital to foster innovation
and competition in the banking sector.
The announcements opened the door on the potential to create a digital bank and platform business, akin to Starling Bank in the UK. Starling was founded in 2014 by industry-leading banker Anne Boden, who not only recognised how technology could transform the way people manage their money and serve customers in a way that traditional banks hadn’t, but also how a platform business can accelerate scale. They have since surpassed one million accounts, raised £263 million in backing and were voted Best British Bank two years running. Their customers also rate them Excellent on Trustpilot.
Throughout 2017 Steve developed the concept, built a team and by January 2019, Volt Bank was Australia’s first neobank to receive an unrestricted ADI licence. It has now begun on-boarding sections of its 40,000-strong waitlist and is announcing a ‘no catches’ ongoing base interest rate of 2.15 per cent on savings, ahead of a public launch planned for early 2020. Volt’s ‘no catches’ interest rate is not subject to an introductory period, or conditions that lead to many consumers not actually receiving a higher rate, like minimum monthly deposits or a minimum number of transactions.
Volt’s unique digital solution was designed to help consumers
‘save often’ and ‘spend wisely’ after CEO & Co-Founder, Steve Weston, noted
a distinct absence of personal finance products that actually help to make
Australian consumers better off.
Steve Weston, Volt Bank’s CEO and Co-Founder
“What I find troubling is banks saying they are putting
customers at the heart of what they do but that isn’t reflected in actual
practice. As an example, banks should say what percentage of their savings
account customers get the higher advertised interest rates rather than the
often very low base rates. The same applies to home loan interest rates. Why is
it that new customers get a better deal than loyal customers?
“Banking needs to be done in a better way. Volt’s first
product, our savings account, offers a highly competitive rate without any
conditions. I challenge other banks to do the same.
“We are taking our
time to build every product and feature in a prudent fashion, including by
seeking feedback through our co-creation app, Volt Labs. When we launch to the
public in 2020, Volt will be a viable, well-understood, and trusted option for
everyday Australians,” concluded Mr. Weston.
So, what’s under the hood?
Well first there are no branches, but it has also been built
digital first. and at the heart of the concept is the desire to truly assist
customers reach the outcomes they’re seeking and is aiming to help shift
behaviours. For example, the Volt app will
also support savings discipline, helping to create a savings habit. This is
decidedly NOT a product push.
Customers can onboard in less than 3 minutes and Volt will
deliver a customer experience not provided by incumbent banks.
But Volt is also a platform, where providers of digital finance services can connect. Indeed, Volt already has an agreement with PayPal (after Citi, Barclays etc). Via their API they plan to offer best in class digital services on their platform.
They plan to grow via what Steve called Viral Advocacy and the 40,000 wait-list is part of that plan.
And Volt is a fully fledged ADI (in APRA speak) and so can
offer deposit and savings accounts protected by the Government’s Financial
Claims Scheme up to $250k, just like other Australian licenced banks.
They have a road map already laid out ahead, tackling other
customer needs, and whilst initial funding for the venture has come mainly from
high-net worth investors, they will be tapping a broader investor base to raise
the capital they will need to commence lending quite soon.
So, I see this as more than just another upstart Fintech.
Volt has the pedigree, the vision and the capability to become a significantly
disruptive player in the Australian market. And frankly, as their Deposit rate
is no holds barred higher than others in the field, it will be interesting to
see how the incumbents respond. But this could just be the start of the long
awaited and needed banking revolution here. Perhaps like Aussie Home Loans disrupted
mortgage lending a generation ago?
Things could get very interesting indeed!
Note: DFA has no commercial relationship with Volt Bank. This article is one in our series on digital banking disruption – Fintech Spotlight.
