Australian Bankers Association CEO makes claim as broad terms of reference means brokers and lending could be examined
Australian Bankers Association CEO makes claim as broad terms of reference means brokers could be examined
The royal commission into banking could force banks to raise interest rates, the CEO of the Australian Bankers Association (ABA) has warned.
Announcing the royal commission yesterday, the Government claimed it was reacting to months of damaging speculation. However, ABA CEO Anna Bligh was quoted in the Australian Financial Review warning the commission could have the opposite effect.
"Australian banks borrow significant amounts of money overseas so that they can lend to people for mortgages and they need those costs of funds to be as low and reasonable as possible.
"This runs the risk that Australia will be seen as a more risky investment by global investors that can go anywhere. The risk is that they don't invest or suspend their investment in Australia or they put a premium on the price of those funds," Bligh said.
The Government takes a different view, with Treasurer Scott Morrison describing the commission as “an important message for markets and the international financial community. This inquiry does not question the robust nature of our prudential system.”
Out of cycle rate rises
Whilst the royal commission could force rates up, they could also force them down.
The commission’s terms of reference are broad and so could include scrutiny of recent out-of-cycle rate rises by the banks, according to Martin North, principal of Digital Finance Analytics.
According to the terms of reference, the commission can examine “any conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations.” North notes that “community standards could be ‘why are you making out-of-cycle rate rises?’ “
The ACCC is already examining out-of-cycle rate rises, separate to the royal commission.
Investment bank UBS has suggested that post-royal commission, it could become harder for the banks to raise rates in response to regulation.
Why brokers could be included
The royal commission’s broad terms of reference means that brokers could be included.
It will look at financial services entities, including “anyone acting on its behalf”. The definition of financial services entity includes ADIs and holders of Australian Financial Services Licenses.
DFA principal North told MPA that “I don’t think you can assume mortgage brokers are excluded.”
MFAA CEO Mike Felton said that the association “will cooperate and engage with the process as required.” Felton added that when it came to broker remuneration, and the work of the Combined Industry Forum, it was “business as usual”. The CIF delivered its recommendations on commissions to the Treasury earlier this week.
The royal commission into banking could force banks to raise interest rates, the CEO of the Australian Bankers Association (ABA) has warned.
Announcing the royal commission yesterday, the Government claimed it was reacting to months of damaging speculation. However, ABA CEO Anna Bligh was quoted in the Australian Financial Review warning the commission could have the opposite effect.
"Australian banks borrow significant amounts of money overseas so that they can lend to people for mortgages and they need those costs of funds to be as low and reasonable as possible.
"This runs the risk that Australia will be seen as a more risky investment by global investors that can go anywhere. The risk is that they don't invest or suspend their investment in Australia or they put a premium on the price of those funds," Bligh said.
The Government takes a different view, with Treasurer Scott Morrison describing the commission as “an important message for markets and the international financial community. This inquiry does not question the robust nature of our prudential system.”
Out of cycle rate rises
Whilst the royal commission could force rates up, they could also force them down.
The commission’s terms of reference are broad and so could include scrutiny of recent out-of-cycle rate rises by the banks, according to Martin North, principal of Digital Finance Analytics.
According to the terms of reference, the commission can examine “any conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations.” North notes that “community standards could be ‘why are you making out-of-cycle rate rises?’ “
The ACCC is already examining out-of-cycle rate rises, separate to the royal commission.
Investment bank UBS has suggested that post-royal commission, it could become harder for the banks to raise rates in response to regulation.
Why brokers could be included
The royal commission’s broad terms of reference means that brokers could be included.
It will look at financial services entities, including “anyone acting on its behalf”. The definition of financial services entity includes ADIs and holders of Australian Financial Services Licenses.
DFA principal North told MPA that “I don’t think you can assume mortgage brokers are excluded.”
MFAA CEO Mike Felton said that the association “will cooperate and engage with the process as required.” Felton added that when it came to broker remuneration, and the work of the Combined Industry Forum, it was “business as usual”. The CIF delivered its recommendations on commissions to the Treasury earlier this week.
