Tag: ABA

ABA Welcomes APRA’s IO Decision

The Australian Bankers Association (ABA) says the APRA decision “will increase choice for home loan customers”.

They say:

Today’s announcement of the removal of the 30% benchmark for new interest-only residential mortgages will allow all banks to offer more choice for customers, leading to an increase in competition across the industry, particularly for smaller and regional banks.

The benchmark was introduced by APRA in 2017 to respond to concerns of an oversupply of interest-only loans. The benchmark had a greater effect on banks with smaller home loan lending operations.

CEO of the Australian Banking Association Anna Bligh said that the decision by APRA would not only benefit customers, it also showed that banks were lending prudently with the proportion of interest-only loans more than halving in two years.

“APRA’s announcement today shows that banks have adjusted lending to respond to concerns around an oversupply of interest-only loans, illustrating a prudential system where both banks and regulators can quickly and effectively respond to a changing environment,” Ms Bligh said.

“While banks will continue to lend prudently, today’s decision will mean all banks can offer more choice for customers who are looking to buy a house or apartment.

“Increased competition across the industry will mean customers have more ability to shop around for the best deal for them when looking at an interest-only home loan,” she said.

In terms of banks home loan commitments, the proportion of interest-only loans are now 16.2% much lower than the proportion seen two years ago (37%).

ABA – Ending Fees for No Service, Grandfathered Payments

The ABA says Australia’s banks will change the Banking Code of Practice to overhaul the way they manage a customer’s estate when they have died and end ‘fees for no service’ across the industry. Further to this they will seek new legislation to end grandfathered payments and trail commissions for financial advisers.

Surely this should be just been good business practice, but at least it will be incorporated in the Banking Code now!

These reforms are the first of several key changes in response to the Royal Commission and include:

  • Ending ‘fees for no service’ – Banks will change the way they manage ongoing financial advice, proactively contacting customers to confirm what advice is required and only charging for what is provided.
  • Changing the Banking Code of Practice to improve the way banks manage a deceased estate – Once notified of a customer’s death, banks will proactively identify fees that are for products and services that can no longer be provided in the circumstances, stop charging those fees and refund any paid.
  • Seeking new legislative changes to the Future of Financial Advice (FOFA) reforms to remove all legislative provisions that allow grandfathered payments and trail commissions in financial advice.

CEO of the Australian Banking Association Anna Bligh said these initiatives addressed two of the strongest concerns raised by the Royal Commission’s Interim Report.

“It has always been unacceptable for any organisations to charge fees without providing a service,” Ms Bligh said.

“This announcement will put beyond the shadow of a doubt that this practice has no place in Australia’s banking industry.

“Banks will change the way they manage a customer’s account, proactively contacting them to confirm what services are required for their investments and only charging for those provided.

“This issue of charging fees without service, particularly when customers have recently died, was raised during the Royal Commission and identified as unacceptable.

“When someone loses a loved one, they need support and compassion as they finalise their loved one’s financial affairs. Charging ongoing advice fees to dead people is clearly unacceptable,” she said.

Right now banks are working with customers to refund those charged a fee where no service was provided. Latest ASIC data indicates customers will receive more than $1 billion in refunds.

“In addition to these changes the industry is supporting legislation to remove grandfathering provisions in relation to financial advice,” Ms Bligh said.

“This is another important piece in the puzzle of ensuring there are no conflicts for advisers,” she said

No more volume-based bonuses for mortgage brokers

The ABA says that Australia’s mortgage broking industry has ended the use of volume-based bonus commissions, campaign-based commissions, and other volume-based bonus payments. This is one of the main findings of an interim report prepared by the Combined Industry Forum.

In making these changes, the industry has responded to concerns that the previous structure of incentives risked customers being encouraged to borrow more than they need.

The move follows findings of ASIC’s Review of Mortgage Broker Remuneration and the Australian Banking Association’s Sedgwick Review which identified there was a risk with volume-based incentives.

Volume-based incentives in residential mortgage lending were also identified during the Royal Commission as not meeting community standards and not delivering the best results for customers.

The Combined Industry Forum has been working with the industry since May 2017 to facilitate progress of the adoption of ASIC’s recommendations.

“The work of the Combined Industry Forum shows how the industry is committed to reform and to raise the bar in support of good customer outcomes,” Chair of the Forum, Anthony Waldron, said.

“Mortgage brokers enable greater access and affordability for all consumers to lending, and these changes are a positive step towards setting new standards and shaping the future of the broking industry.”

CEO of the Australian Banking Association, Anna Bligh, said the interim report outlined important changes which would help refocus the industry on producing strong outcomes for its customers.

“The ASIC Review, the Sedgwick Review, the Productivity Commission and the Royal Commission have all shown us that the industry has a problem with these types of payments that may encourage customers to borrow more than they need,” Ms Bligh said.

“These types of payments present a risk that brokers will place customers with lenders for the wrong reasons.

“By addressing these types of incentives, the industry has acknowledged their failings and taken responsibility to fix the problems to ensure Australian customers are receiving high quality advice,” she said.

Mortgage and Finance Association of Australia CEO, Mike Felton, said he was pleased with the progress made by the industry as outlined in the interim report, noting that the industry has taken decisive action on this key issue and other recommendations raised by ASIC and the Sedgwick review.

“I am particularly pleased with the progress made this year. This move gives consumers continued confidence that recommendations from brokers are not biased towards a particular lender,” Mr Felton said.

“The abolishment of volume-based bonus commissions by members is a significant milestone for the industry. I look forward to continuing our work with industry and consumer groups as we implement additional reforms in response to ASIC’s Report,” he said.

Finance Brokers Association of Australia Limited (FBAA) Executive Director Peter White said the change was a fantastic outcome.

“Moving away from campaign based incentives and other volume-based bonus payments is an important step in addressing community concerns about remuneration practices in the mortgage broking industry,” Mr White said.

“Scrapping these bonuses that encouraged a focus on sales is an important step for the industry and demonstrates its commitment to change while also maintaining healthy competition.

“Each member of the Combined Industry Forum is committed to driving change and to ultimately rebuilding trust with our customers,” he said.

The industry has begun overhauling agreements between providers and brokers to remove discount or ‘free aggregation’ for specific loans. This will substantially reduce incentives for brokers to sell loans from one particular provider. This work will be completed by the end of the year.

These changes are part of a package of reforms recommended by the Forum at the end of last year, which includes further changes to the standard commission model, a new regime for controlling and disclosing non-monetary benefits, and improved public reporting and disclosure requirements.

As part of the commitment made by the Forum, Treasury and ASIC have been briefed on the interim report.

ABA Backs Cash Payments Limit

The ABA Australia’s banks have today backed the Federal Government’s move to limit cash payments to $10,000 to tackle the ‘black economy’, however have highlighted the need for any reform to be implemented carefully.

This year’s budget included a new limit on cash payments to $10,000 to clamp down on the ‘black economy’, one of the recommendations of the black economy taskforce appointed by Minister O’Dwyer.

In its submission released today the banking industry outlines its broad support for the change, however have highlighted areas of concern.

Key points of interest to the banking industry are:

  • The need for a realistic implementation timeframe to help customers and businesses who are heavily reliant on cash payments so they can adapt to the changing environment
  • Ensuring the cash limit does not apply to transfers between financial institutions which are critical to ensuring cash is distributed quickly and easily throughout the economy
  • The change applies to payments only and not withdrawals of over $10,000

CEO of the Australian Banking Association Anna Bligh said that the industry was fully supportive of the Federal Government’s efforts to tackle the ‘black economy’.

“Limiting cash payments to $10,000 is an important change to make sure business and individuals pay their fair share of tax and operate within the law,” Ms Bligh said.

“Banks are on the ground regularly talking with local business, so they know the importance of getting this policy right.

“It’s important that local shop owners, manufacturers and others are given enough time to adapt to this policy which for many of them will be a big change to the way they do business.

“It’s also important that banks can continue to serve the economy by quickly distributing cash where needed therefore it’s important an exception is clearly made when it comes to this policy,” she said.

Hardship Customers Protected in New Credit Regime

The ABA says Australia’s four major banks have reached an agreement to protect vulnerable customers from being unfairly treated in the new mandatory Comprehensive Credit Regime.

The four major banks, who will be required to report the credit history of 50% of customers by the end of September, will not include customers who have reached agreement on hardship arrangements with their bank. This will continue for the first 12 months of the regime while the Attorney-General is conducting a review into this issue.

CEO of the Australian Banking Association Anna Bligh said this was a critical issue for Australia’s major banks who were united behind this arrangement to ensure all customers are treated fairly in what will be an important change in credit history reporting.

“Australia’s banks have been working closely with the Federal Government and other stakeholders to ensure we get this major reform right, without unfairly treating some customers, and implemented without delay,” Ms Bligh.

“Australia’s banks are fully behind this new regime and see the great benefit it can bring in helping customers quickly and easily get a great deal on their personal loans, home loans and credits cards. The four major banks are committed to meeting the start date of 30 September in accordance with the CCR regime.

“Currently if you have a great credit history, the only organisation who knows this is your bank.

“This new regime takes that powerful information and places it into the hands of customers who can ensure they get the best deal possible from a financial institution.

“As with all major reforms in banking it’s important we don’t leave people behind.

Those who have experienced hardship through no fault of their own such as losing a job, sickness, natural disasters or relationship breakdown need to be protected in this new regime.

“Unexpected events happen in life, which banks understand, therefore it’s important that we can discreetly show this on credit histories to make sure customers don’t have further difficulty in the future,” she said.

ABA Calls Time On Elder Financial Abuse

Australians can now get on board the drive for change to tackle Elder Financial Abuse in a new campaign launched today by the Australian Banking Association, National Seniors, the Council on the Ageing, the Older Persons Action Network and the Finance Sector Union says the ABA.

The campaign invites Australians to write to their state or territory Attorneys General demanding change to empower bank staff to properly detect and safely report Elder Financial Abuse.

In February, Australia’s banks renewed their push for change and called on the Federal, state and territory governments to have key policy changes decided by Christmas. These changes are:

  • Standardised Power of Attorney orders across state and territories
  • An online register of Power of Attorney Orders
  • A designated safe place for local bank staff and members of the public to report suspected abuse.

CEO of the Australian Banking Association Anna Bligh said this was a chance for all Australians to show their support and call on lawmakers to make the changes needed without further delay.

“While elder abuse can take many forms, elder financial abuse is one of the most common forms and one that local bank branch staff witness regularly,” Ms Bligh said.

“The Australian public can now take part in our campaign by logging onto our website and writing directly to their state or territory or Federal Attorneys General calling on them to take urgent action.

“Bank staff unfortunately all too often see people who are their customers being pressured to give access to their accounts, all too often see their accounts being drained by family members, by friends that they trust and care about.

“This is a really difficult, complex problem, but there are things that can be done about it.

“We need a standardised power of attorney order, with an online register and a designated safe place to report suspected abuse to help address this growing problem in our community.

“Australian banks, along with seniors’ groups and the Financial Services Union, are calling on the Federal Government and the states and territories to take these actions to empower local branch staff to detect and report suspected Elder Financial Abuse.

“The last meeting of Attorneys General was an important step in taking action, however every day we delay the problem continues and grows in our community,” she said.

To get on board with the campaign go to www.ausbanking.org.au/elderabuse and show your support.

 

Australians Warned to Beware of Phone Scams

Australians are urged to be on guard against unscrupulous, unsolicited callers, claiming to represent the Australian Banking Association and asking for bank details to issue a ‘refund’, survey customer satisfaction or record banking history.

According to the ACCC every year 33,000 Australians are targeted by scammers in this particular way, with callers pretending to represent banks and other financial institutions, with recent estimates placing the cost to victims at over $4.7 million. This scam targeting the ABA is ongoing and was first reported in 2016. Banks often encounter this type of scam, with callers claiming to contact customers on their behalf.

Some of the techniques used by these scammers include:

  • Asking who you bank with, how long you have banked with them and your level of satisfaction
  • Asking for personal and banking details, including your name and driver’s licence number, bank account or credit card number, PINs or internet banking login
  • Telling people they are owed a ‘refund’ for overcharged bank fees but they have to pay a fee for it. They ask people to send money via post or Western Union.

Executive Director of Consumer Policy Christine Cupitt said that it was important customers remain vigilant against scammers even if they claim to be from reputable organisations such as banks or associations.

“We’ve seen a concerning rise in the number of people falsely claiming to be from the ABA, preying on unsuspecting victims and asking for them personal financial details,” Ms Cupitt said.

“The ABA, or any member bank, will never call members of the public seeking information about their personal bank accounts or security information.

“If you think you’ve given your personal information to a scammer we urge you to urgently contact your financial institution.

“It’s vitally important that Australians keep their financial identity safe by following important measures such as not giving out your PIN, deleting spam e-mails, keeping antivirus software up to date and not responding to requests from unknown phone numbers.

“This week is ‘National Scams Awareness Week’, a timely reminder that if you think you’ve been the target of scammers, or indeed the victim of one, you should report it immediately to ACCC’s www.scamwatch.gov.au,” she said.

Tips to protect your financial identity

  • Don’t provide your financial details, including PIN or internet banking login or password to anyone.
  • Guard the following identity information carefully and only provide to trusted people and entities: date of birth, current address, driver’s licence number and passport details.
  • Delete spam and scam e-mail – if the offer sounds too good to be true, it probably is.
  • Keep your anti-virus and firewall software up-to-date.
  • Do not respond to requests that ask you to call unknown or unverified phone numbers.

Be very careful about clicking on links in emails. Do not use links to access trusted websites. Enter the correct address for websites into the address bar of your browser.

Now The ABA Supports Reforms…

The ABA says that the past few days of hearings at the Royal Commission have been sobering for the entire industry.

The issues raised have been unacceptable and do not meet the high standards the community rightly expects of banks.

Australia’s banks are committed to tackling misconduct head-on and strongly back the reforms proposed today by the Turnbull Government to penalise bad conduct within the industry.

A stronger range of penalties for misconduct is vital to tackling criminal and unacceptable behaviour by individuals and corporations.

The industry has supported the strengthening of the penalties regime for misconduct since the Federal Government announced its review 18 months ago, as an outcome of the Financial Services Inquiry.

Before today’s announcement, banks had already recognised the need for change and have put in place a rigorous conduct background check for bank employees to stop those with a history of misconduct simply moving from one institution to another.

Many of the issues raised over the last few days are the subject of investigation with changes already underway in the sector to ensure cases such as these cannot reoccur. The industry expects that further changes should and will be made following the final recommendations of the Commission.

Small Business Finance Roundtable

The Reserve Bank hosted a roundtable discussion on small business finance today, along with the Australian Banking Association and the Council of Small Business Australia. The roundtable was chaired by Philip Lowe, Governor of the Reserve Bank.

Small businesses are very important for the economy. They generate significant employment growth, drive innovation and boost competition in markets. Access to external finance is an important issue for many small businesses, particularly when they are looking to expand.

Our own SME survey highlights the problems SME’s face in getting finance in the face of the banks focus on mortgage lending.  The latest edition of our report reveals that more than half of small business owners are not getting the financial assistance they require from lenders in Australia to grow their businesses.

The aim of the roundtable was to provide a forum for the discussion of small business lending in Australia. The participants included entrepreneurs from the Reserve Bank’s Small Business Finance Advisory Panel along with representatives from financial institutions, government and the financial regulators.

The challenges faced by small businesses when borrowing were discussed. The entrepreneurs highlighted a number of issues, including:

  • access to lending for start-ups
  • the heavy reliance on secured lending and the role of housing collateral and personal guarantees in lending
  • the loan application process, including the administrative burden
  • the ability to compare products across lenders and to switch lenders.

The participants discussed a range of ideas for addressing these challenges. Financial institutions shared their perspectives and discussed some of the steps that are being taken to address concerns of small business. The roundtable heard some suggestions about how to improve the accessibility of information for small businesses about their financing options. The roundtable also heard from the Australian Prudential Regulation Authority regarding the proposed revisions to the bank capital framework that relate to small business lending.

The roundtable discussed some other policy initiatives that are currently underway, including the introduction of comprehensive credit reporting and open banking. Participants agreed that these initiatives could help to improve access to finance, and the Reserve Bank will continue to monitor developments closely.

Background

The Small Business Finance Advisory Panel was established by the Reserve Bank in 1993 and meets annually to discuss issues relating to the provision of finance, as well as the broader economic environment for small businesses. The panel provides valuable information to the Reserve Bank on the financial and economic conditions faced by small businesses in Australia.

The Reserve Bank has previously hosted discussions on small business finance issues, including a Small Business Finance Roundtable in 2012 and a Conference on Small Business Conditions and Finance in 2015.

The Australian Banking Association, along with the Australian Council of Small business, representatives for member Banks and other stakeholders were also in attendance to bring their own perspective on the issues and to answer questions. The event was agreed to and organised at the end of last year.

Australian Banking Association CEO Anna Bligh said that the Roundtable was an important opportunity for Australia’s banks to listen first hand to the needs of small business.

“Small business is the engine room of the Australian economy, accounting for more than 40% of all jobs or around 4.7 million people,” Ms Bligh said.

“This Roundtable was an important step in building the relationship between banks, small businesses and their representatives.

“Banks are working hard to better understand the needs of business, their challenges and how they can work with them to help them achieve their goals,” she said.

ABA Says Banking Reforms Progressing At Cracking Pace

The ABA says today’s release of the final report of independent governance expert, Mr Ian McPhee AO PSM, shows that Australia’s banks have made significant progress on the Better Banking Reform Program, including finalising many of its measures.

The program, which began in April 2016, outlined a range of changes and initiatives to achieve three outcomes – better products, better service and better culture. Banks have been implementing these reforms over the last two years, with Mr McPhee independently monitoring their program as part of the industry’s commitment to accountability and transparency.

A major part of this reform has revolved around changes to the way banks pay their staff, as outlined in the Sedgwick Review completed in 2017. These changes include removing direct sales incentives, abolishing mortgage broker commissions directly linked to loan size and introducing balanced scorecards in each bank. The review set a deadline for these changes to be completed by 2020 however banks are already well underway in implementing these reforms.

Australian Banking Association CEO Anna Bligh thanked Mr McPhee for his expert oversight over the last two years providing independent governance advice and monitoring for the ambitious industry reform program.

“Ian McPhee and Price Waterhouse Coopers have done a rigorous job over the last two years in their independent monitoring of the implementation of the Better Banking Reform Program,” Ms Bligh said.

“The industry has set a cracking pace on some of the toughest reforms in over a decade, as detailed in Mr McPhee’s final report, however there is still further work to be done to bed these down.

“Banks have made a large investment in reform to better meet community expectations, such as changing the way bank staff are paid and improving customer protections under the new Banking Code.

“Banks are on track to meet the 2020 deadline set by the Sedgwick Review to reform the way they pay their staff including abolishing direct sales incentives and scrapping mortgage broker commissions directly linked to loan size.

“While this is the final report by Ian McPhee the industry has taken his advice and will be putting in place further arrangements for public reporting.

“Banks will be making further regular public reports on the success of the program and their ongoing implementation of the Sedgwick recommendations and the new Banking Code,” she said.

Key initiatives already implemented include:

  • Customer advocates within banks to ensure complaints are resolved quickly and fairly
  • Improving protections and awareness of processes for whistleblowers, including best practice industry guidelines
  • Stamping out poor conduct in the industry by ensuring staff with records of poor behaviour do not simply move around the industry.