Tag: CBA

More CBA Bad News

Ian Narev, will retire by the end of the 2018 financial year it has been announced.

The Chairman of the Commonwealth Bank of Australia, Catherine Livingstone AO, said today that the Board had decided to provide details of its planned Chief Executive succession process to ensure the market is fully informed and to provide certainty for the business.

Managing Director and Chief Executive Officer, Ian Narev, will retire by the end of the 2018 financial year, with the exact timing dependent on the outcome of an ongoing comprehensive internal and external search process.

Succession planning is an ongoing process at all levels of the Bank. In discussions with Ian we have also agreed it is important for the business that we deal with the speculation and questions about his tenure. Today’s statement provides that clarity and will ensure he can continue to focus, as CEO, on successfully managing the business.

Separately, ASIC said the Commonwealth Bank (CommBank) will refund over 65,000 customers approximately $10 million, after selling them unsuitable consumer credit insurance (CCI).

CCI is a type of add-on insurance, sold with credit cards, personal loans, home loans and car loans. It is promoted to borrowers to help them meet their repayments if they become sick, injured or involuntarily unemployed.

CommBank sold ‘CreditCard Plus’, insurance for credit card repayments, to 65,000 customers who were unlikely to meet the employment criteria and would be unable to claim the insurance.

CommBank is also refunding approximately $586,000 in premiums to around 10,000 customers after it over-insured these customers for Home Loan Protection CCI taken out with a Commonwealth Bank home loan, resulting in the over-charging of premiums.

ASIC Deputy Chair Peter Kell said it was unacceptable that customers were sold insurance that did not meet their needs. ‘One of ASIC’s priorities is addressing poor consumer outcomes associated with add-on insurance, including CCI. Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this.’

CommBank and CommInsure identified and reported this issue to ASIC.

CommBank will be contacting eligible ‘CreditCard Plus’ customers shortly.

Background

CreditCard Plus

CommBank will remediate customers who were sold ‘CreditCard Plus’ between 2011 and 2015 who were either:

  • unemployed; or
  • students.

They were therefore not eligible to claim for unemployment or temporary and permanent disability cover provided by the CCI.  The vast majority of customers were students with lower credit card limits.

Home Loan Protection

Between 2007 and 2015 CommBank did not adjust the amount of cover under the CCI policy where the amount the customer borrowed was less than the original loan amount they applied for.

In charging these customers premiums based on the loan amount applied for rather than the amount that was actually borrowed, CommBank charged these customers for more cover than they needed under the policy. In some cases, cover was also provided and paid for before a loan was drawn down.  CommBank will continue its review to ensure all affected customers are identified and remediated.

CBA FY17 Profit Up 7.6%

CBA just released their FY17 results, with statutory NPAT $9,928m, up 7.6% on FY16. The cash NPAT was up 4.6% to $9,881m. Much of the lift is explained by a fall in loan impairment expense, down 12.8% to $1,095m, plus a one off from the Visa transaction.

However their net interest margin fell 3 basis points to 2.11%, despite recent mortgage book repricing. The underlying cost income ratio fell 60 basis points to 41.8%.

As a result, return on equity overall fell 0.5% to 16%, earnings per share was $5.74 (compared with $5.55 in FY16) and the dividend per share was $4.29, compared with $4.20 last year.

Operating income increased by 3.8%, ahead of operating expense growth of 2.4%, delivering positive jaws on an underlying basis.

Banking income grew 4.3% due to volume growth in home lending, business lending and deposits. Insurance income fell 1.1% due to loss recognition of $143 million.

CBA Invested almost $1.3 billion whilst maintaining underlying expense growth to 2.4%.

Higher wholesale funding costs and increased competition in home and business lending more than offset asset repricing, resulting in a 3 basis point decline in the net interest margin to 2.11%. In calculating the Group’s NIM, mortgage offset balances are now being deducted from average interest earning assets to reflect their non-interest earning nature, and to align with peers and industry practice. This results in changes to Group’s NIM for current and prior periods.

It was flat second half thanks to home loan repricing.

Looking across the divisions, the Retail Bank again contributed the lions share of the result, but with positive growth at the NPAT level in all divisions, other that IFS; all on a cash basis.

In the Retail bank, consumer arrears were controlled, though losses in WA climbed again, with 90+ days at 1.23%.

Some interesting mortgage related information was contained in the announcement.

The FY17 losses on their home loan book is 3 bpts. The portfolio dynamic LVR is 50%. Investment loans make up 33%, with new investment loans falling from 37% in Dec 16 to 32% in Jun 17. 77% of customers are paying in advance – this includes any amount ahead of monthly minimum repayment and includes offset facilities. They have a loan serviceability buffer of 2.25% above the customer rate, with a minimum floor rate (RBS: 7.25% pa, Bankwest: 7.35%). They have a maximum LVR of 80% for IO loans now. Interest Only loans have lower arrears.

John Symond exercised his put option which will require CBA to acquire the remaining 20% interest in Aussie Home Loans (AHL). The purchase price will be determined in accordance with the terms agreed in 2012 and the purchase consideration will be paid in the issue of CBA shares. They will consolidate AHL from completion of the acquisition which is currently expected to be in late August 2017.

Their focus on propitiatory loan origination has led to a fall in the proportion of loans via brokers.

More broadly, CommBank research on financial wellbeing shows one in three Australian households would struggle to access $500 in an emergency, and more than a third of Australians are spending more than they earn each month.

The Group’s Common Equity Tier 1 (CET1) ratio was 10.1% on an APRA basis, and 15.6% on an internationally comparable basis, maintaining CBA’s position in the top quartile of international peer banks for CET1.

CBA are confident they will meet APRA’s‘unquestionably strong’ CET1 ratio average benchmark of 10.5% or more by 1 January 2020.

Customer deposits contributed 67% of total funding and the Net Stable Funding Ratio (NSFR) was 107%.

The average tenor of the wholesale funding portfolio was 4.1 years and the average tenor of new issuance was 5.2 years.

Liquid assets increased from $134 billion in 2016 to $142 billion, and the Liquidity Coverage Ratio was 129%.

The Leverage Ratio was 5.1% on an APRA basis and 5.8% on an internationally comparable basis.

The banking levy is estimated at $258m (post tax), first payment due March 2018. The Group effective tax rate will be 30.3% after the levy.

 

 

CBA Executives Lose Short Term Bonus

A statement by the Chairman of the Commonwealth Bank of Australia, released today says:

Yesterday the Commonwealth Bank of Australia Board met to consider the bank’s financial results and the remuneration for senior executives for the 2017 financial year.

In determining the final 2017 financial year outcomes for remuneration, the Board gave consideration to risk and reputation matters impacting the Group.

The remuneration outcomes will be disclosed in detail in the CBA Annual Report to be released next week. This year, the Board recognises heightened public interest in executive remuneration, particularly having regard to the civil penalty proceedings initiated last week by the Australian Transaction Reports and Analysis Centre (AUSTRAC).

Therefore, in advance of the presentation of CBA’s financial results tomorrow, the Board advises that it has decided to reduce to zero the Short-Term Variable Remuneration outcomes for the CEO and Group Executives for the financial year ended 30 June 2017.

In reaching this conclusion the overriding consideration of the Board was the collective accountability of senior management for the overall reputation of the Group.

The Board also recognised that it has shared accountability and therefore has decided to reduce Non-Executive Director fees by 20 per cent in the current 2018 financial year.

The remuneration arrangements for the CEO and Group Executives are made up of both fixed and at risk short and long-term variable remuneration. The ‘at risk’ components are based on performance against key financial and non-financial measures. Full details of the remuneration outcomes and the Board’s full consideration will be disclosed next week in the Annual Report.

Mr Narev retains the full confidence of the Board.

CBA says the money laundering issue was caused by a software update

From Business Insider.

The Commonwealth Bank says its current legal problem over allegations of allowing money laundering, which potentially could see Australia’s largest company facing massive fines, started with a simple software problem with its ATMs.

Australia’s largest company says: “In an organisation as large as Commonwealth Bank, mistakes can be made. We know that because we are a big organisation, these mistakes can have significant impact.”

Last week Australia’s financial intelligence and regulatory agency, AUSTRAC, took the Commonwealth to the Federal Court claiming the bank breached the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act over combined cash deposits of $624.7 million.

The bank, in a statement this morning, says the issue began after an unrelated software update to Intelligent Deposit Machines, the latest ATMs, in late 2012.

A coding error meant the ATMs did not create reports when deposit amounts exceeded $10,000, the level at which transactions need to be reported to authorities.

“This error became apparent in 2015 and within a month of discovering it, we notified AUSTRAC ,” the bank says.

AUSTRAC alleges more than 53,700 contraventions and says the Commonwealth didn’t take steps to assess the risks of intelligent deposit machines until mid-2015, three years after they were introduced.

On the potential fines associated with the breaches, the Commonwealth says the alleged contraventions could be considered to arise from a single course of conduct, a systems error.

Late lodgement of transaction reports carries a penalty of up to $18 million, meaning that in theory the bank could be fined that amount for each late transaction report, adding up to more than $966 billion.

“Ultimately, a court will seek to ensure that, overall, any civil penalties are just and appropriate and do not exceed what is proper having regard to the totality of established contraventions,” the bank says.

“Under the Act, the only mechanism available to AUSTRAC to secure a pecuniary penalty from CBA is by taking court action.

“What we can say about those proceedings is limited until they have run their course.

“In the meantime, CBA remains committed to continuously improve its compliance with the AML/CTF Act and will continue to keep AUSTRAC abreast of those efforts.”

Today Commonwealth Bank CEO Ian Narev says he’s focused on doing his job and has no intention of stepping down. “Right now, I’m focused on doing my job and am not spending any time on thinking about my own position,” he says.

Here’s the full statement from the Commonwealth:

    • We respect greatly the role AUSTRAC plays in keeping Australians safe. To that end, we work closely with AUSTRAC as well as the Australian Federal Police and other authorities.

AUSTRAC filed legal proceedings on Thursday and we are taking these very seriously. We have been working our way carefully through the statement of claim. While legal proceedings limit the detail we are able to provide, we acknowledge the public interest in this matter, and are committed to being as open as we can with updates to all our stakeholders.

We have already said we will file a statement of defence. We do not intend to litigate this matter publicly; our responses have been made in consideration of the desire for greater information by our people, shareholders, customers and the community.

There has already been extensive public discussion and because of the complexity of the matter, some facts are worth clarifying.

Our Intelligent Deposit Machines (IDMs) are now providing the correct Threshold Transaction Reports (TTRs) to AUSTRAC, and have been since September 2015.

When we first rolled out these machines in May 2012, they were providing all the correct TTR reporting. The issue began after an unrelated software update to the IDMs in late 2012. Following the software update, a coding error occurred which meant the IDMs did not create the TTRs needed. This error became apparent in 2015 and within a month of discovering it, we notified AUSTRAC, delivered the missing TTRs and fixed the coding issue. The vast majority of the reporting failures alleged in the statement of claim (approximately 53,000) relate specifically to this coding error. We recognise that there are other serious allegations in the claim unrelated to the TTRs.

In an organisation as large as Commonwealth Bank, mistakes can be made. We know that because we are a big organisation, these mistakes can have significant impact.

We need to be ever more vigilant in the area of financial crime and anti-money laundering. The rapid evolution of technology in banking, the increased sophistication of criminal activity, and higher regulatory expectations together create an imperative to continuously raise our standards. We have increased our investment in people, technology and processes through a program designed not only to address existing weaknesses, but also to meet the growing complexity in this area. This work continues today.

We continue to have an ongoing cooperative relationship with AUSTRAC and have kept them abreast of proactive steps we have taken to further enhance our compliance program and operations.

Allegations against the CBA show the need for a Royal Commission into the banks

From The Conversation.

The Commonwealth Bank is facing another scandal as the Australian Transactions Reports and Analysis Centre (AUSTRAC) launches civil proceedings accusing the bank of being complicit in money laundering.

This exposes a deeply worrying prospect, that the Australian public are vulnerable to crime and terrorism directly funded through the Australian banking system.

AUSTRAC alleges CBA breached the Anti-Money Laundering and Counter-Terrorism Financing Act (2006) 53,700 times since 2012, where transactions were not reported by the bank, or reported too late. The bank faces a potential penalty of A$18 million per breach, which could amount to billions of dollars.

According to AUSTRAC, criminals deposited cash, amounting to tens of millions of dollars, over a period of two years in intelligent deposit machines where it was automatically counted and credited instantly to the nominated recipient account. The funds were then available for immediate transfer to other accounts both domestically and internationally.

In their evidence AUSTRAC details how four identified criminal syndicates were able to readily use CBA ATMs to breach the A$10,000 transaction threshold on 1640 occasions amounting to A$17.3 million. A total of A$625 million of suspicious transactions flowed through these CBA ATMs.

CBA’s response to these serious allegations is that it reports 4 million transactions to AUSTRAC per year contributing to the effort to “combat any suspicious activity as quickly and efficiently as we can.” The bank insists all key personnel have been trained in compliance with the Money-Laundering Act. The CBA acknowledges there was a software fault with a number of their ATMs which allowed these transactions to take place, but apparently this took several years to fix.

Unfortunately this response in the circumstances only provokes further questions.

Regulators asleep at the wheel

What this really shows up is the government’s “light touch” regulatory approach which translates into soft touch regulation. It seems regulators in Australia are too frightened to take action even when there is mounting evidence of illegality.

AUSTRAC itself did not launch any proceedings under the Anti-Money Laundering and Counter-Terrorism Financing Act until 2015. This followed a lengthy report of the Financial Action Task Force which concluded:

[AUSTRAC’s] graduated approach does not seem to be adequate to ensure compliance.

Since then AUSTRAC has taken action against Tabcorp on a money-laundering case which reached a A$45 million settlement in February 2017. This contrasts with far larger fines imposed on international banks for money laundering including a US$1.2 billion fine for HSBC and a US$262 million fine for Standard Chartered in 2012 from the US Justice Department.

At a US Senate hearings in 2012, a HSBC chief compliance officer famously quit his post on the spot in answering money laundering allegations, implying he could not defend the indefensible.

The Australian banking industry has faced minimal pressure to reform compared to other countries, where the restructuring of the banks is progressing. Australia has seen a succession of inquiries however each has focused on particular aspects of the banks functioning and proposed specific reforms.

It will require a Royal Commission into the Australian banks to examine the structural and systemic failures of the banks. The banks have become the main providers of not only retail but investment banking, insurance, superannuation and financial advice, and this deserves critical scrutiny.

If the AUSTRAC allegations against the CBA are proven in the Federal Court, this matter is of a different order of magnitude to earlier problems. It suggests a degree of irresponsibility which is unacceptable in major financial institutions.

It also suggests it’s deeply embedded in the banks cultural and operating processes, which undermines the security of Australian citizens. This would demand a substantive inquiry into the management, integrity and culture of the banks that only a Royal Commission could provide.

In the meantime, the CBA needs to provide firm evidence to the Australian public that none of its ATM machines can continue to be used for money laundering. It also needs to prove there are procedures in place for ensuring all suspicious banking activity by potential criminals or terrorists is fully reported to the Australian authorities as soon as the CBA has any knowledge of such activity.

Author: Thomas Clarke, Professor, UTS Business, University of Technology Sydney

AUSTRAC seeks civil penalty orders against CBA

Australia’s financial intelligence and regulatory agency, AUSTRAC, today initiated civil penalty proceedings in the Federal Court against the Commonwealth Bank of Australia (CBA) for serious and systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

AUSTRAC acting CEO Peter Clark said that this action follows an investigation by AUSTRAC into CBA’s compliance, particularly regarding its use of intelligent deposit machines (IDMs).

AUSTRAC’s action alleges over 53,700 contraventions of the AML/CTF Act. In summary:

  • CBA did not comply with its own AML/CTF program, because it did not carry out any assessment of the money laundering and terrorism financing (ML/TF) risk of IDMs before their rollout in 2012. CBA took no steps to assess the ML/TF risk until mid-2015 – three years after they were introduced.
  • For a period of three years, CBA did not comply with the requirements of its AML/CTF program relating to monitoring transactions on 778,370 accounts.
  • CBA failed to give 53,506 threshold transaction reports (TTRs) to AUSTRAC on time for cash transactions of $10,000 or more through IDMs from November 2012 to September 2015.
  • These late TTRs represent approximately 95 per cent of the threshold transactions that occurred through the bank’s IDMs from November 2012 to September 2015 and had a total value of around $624.7 million.
  • AUSTRAC alleges that the bank failed to report suspicious matters either on time or at all involving transactions totalling over $77 million.
  • Even after CBA became aware of suspected money laundering or structuring on CBA accounts, it did not monitor its customers to mitigate and manage ML/TF risk, including the ongoing ML/TF risks of doing business with those customers.

Mr Clark said that today’s action should send a clear message to all reporting entities about the importance of meeting their AML/CTF obligations.

“By failing to have sound AML/CTF systems and controls in place, businesses are at risk of being misused for criminal purposes,” Mr Clark said.

“AUSTRAC’s goal is to have a financial sector that is vigilant and capable of responding, including through innovation, to threats of criminal exploitation.”

“We believe this can be achieved by working collaboratively with and supporting industry. We will continue to work in this way with our industry partners who also share this aim and demonstrate a strong commitment to it.”

CBA doubles waiting period for IO switch

CBA has doubled the waiting period for customers seeking to switch to an interest-only repayment loan from 90 days to 180 days. This is a further move to try to reduce the proportion of IO loans held, following regulatory pressure to meet the 30% limit.  CBA has already lifted interest rates, tightened lending criteria and throttled back applications via mortgage brokers.

From The Adviser. As of 31 July, customers with Commonwealth Bank (CBA) will be required to wait 180 days to change to an interest-only (IO) loan, while requests to switch within 180 days of loan funding will be sent on for credit assessment.

In addition, clients with loan-to-value ratios (LVR) of more than 80 per cent will not be able to refinance from a principal and interest (P&I) loan to IO within 180 days of funding.

Effective on the same date, the maximum IO terms have been reduced (over the life of the loan) to five years for owner-occupied home loans and 10 years for investment home loans.

Document identification

CBA is also changing the application identification process for new clients, effective 31 July. Brokers will need to acknowledge that they have viewed original identification documents for all borrowers and guarantors, and brokers must provide clear copies of the original (and sighted) identification documents when the application is submitted.

Furthermore, in the case of multiple applicants, brokers must submit each applicant’s identification documents on separate pages for each loan application.

CBA warned: “Missing documentation or discrepancies may result in delays to the customers’ application.”

CBA Ups Interest Only Mortgage Rates

CBA changed their mortgage rates for owner occupied and investor mortgage holders from 7th July. This includes a significant hike for interest only.  They already tightened serviceability requirements a couple of weeks ago.  Principal and Interest Ower Occupied holders get a 3 basis point reduction! All this has, they say, nothing to do with the bank tax.

Commonwealth Bank recognises the importance of ensuring borrowers can sustain a strong path to property ownership and will be reducing our owner-occupier standard variable rate for those repaying principal and interest. From 7 July, customers paying off the home they live in will benefit from a lower standard variable rate of 5.22 per cent per annum, a reduction of three basis points.

Around 80 per cent of owner-occupier customers are repaying principal and interest, and these changes can help these borrowers own their home sooner. A customer with an average mortgage of $350,000 will save $78 a year.

We are supportive of the banking regulator’s moves to manage the level of growth and resiliency in the housing market. To meet our regulatory requirements, variable interest only home loan rates for owner-occupiers and investors will increase by 30 basis points.

Matt Comyn, Group Executive of Retail Banking Services, said: “Paying off your home is important for Australians. For owner occupier customers repaying principal and interest, they can take advantage of the interest rate reduction to pay off their home loan faster. These changes also help us keep the right balance in our home loan portfolio, in line with what our regulators require.”

Customers who currently make interest only payments are encouraged, where they are able, to switch to principal and interest repayments. Switching is easy and attracts no fees. Customers can make the change at no cost online, over the phone, or by speaking with a home lending specialist in branch.

These interest only changes are not in response to the bank levy that was announced as part of the Federal Budget in May.

The new rates will be effective from 7 July 2017.

Variable rates Current New from 7 July 2017  
Standard Owner-Occupied Principal and Interest 5.25% pa 5.22% pa -3bps
Standard Owner-Occupied Interest Only 5.47% pa 5.77% pa +30bps
Standard Investor Principal and Interest 5.80% pa 5.80% pa –
Standard Investor Interest Only 5.94% pa 6.24% pa +30bps

Home Ownership and Work Redefined

In a new report, CBA says the Australian dream is still alive and well, as new goal posts emerge.

As the quarter acre block is becoming a threatened species and backyards are replaced by patios, just under half of Aussies (48 per cent) believe that the property dream is still alive and well, and for others (52 per cent), the Australian dream is being redefined.

In one of the largest national surveys since the Australian Census, with more than one million responses, the Commonwealth Bank has asked Australians about how they perceive their future, investigating attitudes around the property market, adapting to a changing workforce, and future proofing younger generations.

Partnering with demographer and futurist Claire Madden, the CommBank Connected Future Report examines national, economic and social trends that have emerged from the data.

According to Claire Madden, “The remarkable insights emerging from the CommBank ATM data overall is the resilience and tenacity Aussies have in the face of economic uncertainty. As a lead example, while the Australian property dream looks markedly different in 2017, the majority of Australians either fully own or are paying off their home. This has remained constant over the past five decades, so despite uncertainty, the Australian dream has clearly lived through time.”

The research shows while Millennials (Gen Y) are delaying traditional life markers like getting married or having a child, the average age of a first homebuyer has remained relatively constant over the last two decades, sitting at around 32 years of age.

The research has found that despite rapid digital disruption, increased global connectivity and the emergence of artificial intelligence, resilience seems to be a common trend amongst Australians. Almost half (49 per cent) believe our businesses are ready to face the future and 49 per cent believing our kids have the skills they need for tomorrow.

Key findings from the CommBank Connected Future Report include:

The architecturally designed dream

The Australian ‘dream home’ is no longer a weatherboard standalone house. It is an architecturally designed product, as the quality of dwellings has risen over time. Whilst 74 per cent of those living in cities and 81 per cent of those outside capital cities currently live in a stand alone house, 48 per cent of new residential approvals over the past year have been for medium or high density housing. CommBank data reveals 68 per cent of first home buyers purchased a house in the last year, 16 per cent desire to build their architectural dream home after purchasing vacant land, and 15 per cent purchased an apartment or townhouse.

Living in your state of optimism 

The data relating to the Australian property dream reveals that the state you live in impacts your state of optimism. The least optimistic were people residing in New South Wales (53 per cent) and Victoria (54 per cent), and this was significantly high with younger generations (57 per cent in both states). Those in Queensland (51 per cent), South Australia (53 per cent), Western Australia (54 per cent) and the Northern Territory (57 per cent) believe the dream is more attainable.

The ‘options’ Generation 

Gen Y have prioritised global travel, lifestyle experiences, stayed longer in formal education and attained the name KIPPERS (Kids in Parents’ Pockets Eroding Retirement Savings) for staying in the family home longer. Yet now they are in their prime career building and family forming years, they, like their predecessors, are finding a way to overcome the obstacles, respond to new realities, and see the (re)defined dream come alive. Even though the dream has taken a different form, the data reveals property ownership remains high on the aspirational list (average home buying age remains consistent at 32).

Gen Z and Gen Alpha 

According to the research, rapid digital disruption, increased global connectivity and the emergence of artificial intelligence are converging to reshape the business landscape and the way future generations define work. With high job mobility and the increased casualisation of the workforce, Gen Z (8-22 years old) will have 17 jobs across five careers in their lifetime.

As Gen Z and Gen Alpha (born 2010-2024) complete their schooling and enter the workforce, they will need to be adaptive and agile in order to integrate job roles with rapidly advancing automated systems and handle changing employment markets and organisational structures.

Women leading the way

Women are most optimistic about our kids being skilled up for the future with 52 per cent believing they are future ready, compared with 48 per cent of men. This is particularly evident amongst younger age groups, with the greatest gender gap amongst Gen Ys (25-39 year olds) with a 5 per cent differential between males and females.

Culture and society

With almost 3 in 10 Australians (29 per cent) born overseas1, and a quarter (27 per cent) of the population’s labour force born overseas2, immigration has significantly contributed to Australia’s workforce and economy. In the midst of this diversity, CommBank data reveals that almost half of Aussies (49 per cent) believe that our society truly embraces everyone.

CBA Tightens Mortgage Serviceability Requirements

From Australian Broker.

The Commonwealth Bank of Australia (CBA) has announced a series of changes to its mortgage serviceability criteria and reporting standards.

From 10 June, the bank has changed its serviceability calculations for all new owner occupied/investment home loan or line of credit applications.

For those taking out a new mortgage who already have an existing CBA home loan, line of credit or business loan, the bank will assess the ability to pay through an interest rate buffer of 7.25% p.a. or the current interest rate plus 2.25% p.a. minus any existing rate concessions (whichever is higher).

For customers with an existing owner occupied/investment, line of credit or business loan with an external financial institution, CBA will apply a service loading of 30% to the current repayment amount.

The change brings CBA in line with the other majors.

Amendments have also been made regarding reporting standards with CBA now required to collect the following tax residency information from all customers:

  • The name of all countries where the individual is a tax resident
  • The Tax Identification Number (TIN) for countries other than Australia where the individual is a tax resident or a valid reason for not providing the TIN

These changes came into effect on 9 June and are included in the bank’s home loan on-boarding application form. CBA-accredited brokers can view a webinar that provides an overview of the associated alterations.

Finally, the bank has also released a fact sheet on repayments and customer scenarios to help brokers explain the difference between P&I and IO mortgages and why P&I repayments benefit mortgage holders.

“As Australia’s largest lender, Commonwealth Bank is committed to consistently delivering the best customer experience for home buyers, as well as meeting our responsible lending obligations,” a bank spokesperson told Australian Broker. “As a responsible lender, we constantly review our products and services to ensure we are maintaining our prudent lending standards and meeting our customers’ needs both now and in the future.”