Regulator could act on bank capital requirements... Changes to impact big banks?... Major insurer outlines key gap in property market...
Regulator could act on bank capital requirements
According to the Sydney Morning Herald, Australian Prudential Regulation Authority chairman Wayne Byres has declared the banking regulator is willing to act "sooner rather than later" to implement the financial system call for the big four banks and Macquarie to hold higher capital against mortgages, a move that could potentially depress returns.
"I don't think we need to wait for every I to be dotted and t to be crossed [by Basel] because the direction is clear … and the easiest way to deal with any change is to work at it gradually and get started early, and that is the sensible approach we will adopt."
"We will have more to say on those issues shortly but with continued, sensible capital planning, the industry is very well placed to deal with them."
The comments come a day following Murray’s to the AFR summit, citing that he would be inclined to move swiftly to lift the average risk weighting applied on their mortgage books from the present 18 per cent to 25- 30 per cent "because competition is important and urgent and I think the factors we pointed to in the housing market are significant". Murray's Financial System Inquiry (FSI) said rising housing prices were a source of systemic risk in the financial system.
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Changes to impact big banks?
With Australian banks likely to be impacted by upcoming changes to regulatory standards that will increase capital requirements, many are wondering what the impacts will be. In a Motley Fool article, the Federal government’s Financial Systems Inquiry advised that Australian banks be required to increase their equity capital to equal that of the top 25 per cent of globally active banks and increase the risk weighting that they apply to their home loans. While the capital requirements mean banks have to hold a higher percentage of their risk weighted assets as capital, according to the piece, some have recommended holding off until the Basel committee has released what analysts are dubbing the ‘Basel IV’ standards. However some feel that the wait is over.
“I would be more inclined to move on it because competition is important and urgent and I think the factors we pointed to in the housing market are significant,” David Murray said in the article.
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Major insurer outlines key gap in property market
QBE Insurance Australia has released its latest findings on the state of property and mortgages in Australia and it has revealed some key areas of growth brokers and insurers could look to develop. The 2015 QBE Barometer report, notes that purchasing insurance at the same time as purchasing property is a missed opportunity for those in the insurance industry.
The barometer notes that less than half (47 per cent) of customers have mortgage-based insurance with the provider of their mortgage as 18 per cent are seeking expert advice whilst 26 per cent want to keep banking and insurance activities separate.
“Just under one third (31 per cent) of Mortgagors recall being offered building or contents insurance at the time of taking out their mortgage by their financial institution,” the barometer says. “While Big Four bank customers indicated they were more likely to be offered building or contents insurance at the point of sale, this was still limited to just 36 per cent who recalled being offered insurance. Only seven per cent of those getting a mortgage through a broker recall being offered home and contents insurance.”
“In terms of offering any type of insurance, respondents recalled that the Big Four Banks were nearly three times as likely as brokers to offer insurance (56 per cent compared to 19 per cent).”
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