Morning Briefing: Loosening lending ‘counterproductive’, says RBA head

Lending relief not on the cards for first-time buyers
Commonwealth Bank of Australia has tightened its lending to apartment developers because new capital requirements, and particularly the restrictions on lending to investors, increase the settlement risk at the end of the project, according to an article in the Australian Financial Review.

The Australian Financial Review has learnt that over 10 finance negotiations between CBA and apartment developers have fallen over at very late stages in the process because CBA has changed its lending terms and required a higher level of loan coverage. CBA neither confirmed nor denied the move.

"We have been growing our business in this market and in line with our usual business practice for all market segments, we regularly review our risk policy settings," a CBA spokesman said.

"Commonwealth Bank assesses each development on its own merits in determining presales requirements which will vary from project to project. It is business as usual for Commonwealth Bank on property development financing.”

National developers such as David Devine's Metro Property Development are seeing the tighter lending conditions from the big banks, saying "The banks are tightening up their lending because they feel the market might be heating up,” in article with the Financial Review.
 
Small investors losing out in fast rising markets
The proposition that small investors are the biggest losers in today's fast-moving equity markets is backed up by recent capital raisings by ANZ Banking Group and law firm Slater & Gordon, according to an article in the Australian Financial Review.

According to the article, further evidence of the small investor being left completely in the dark can be found in the mysterious world of short selling with its opaque stock lending fees and even-less transparent rules around movements of borrowed stock.

That shorting issue is a pertinent one given the activity which occurred on Thursday in the shares of law firm Slater & Gordon. Market sources have told Chanticleer that about 16 million Slater & Gordon shares were recalled from the borrowing pool by two large institutional holders of the stock.

APRA's new rules on risk weighting of mortgages don't come into force until July next year but ANZ went hell for leather to get $3 billion in capital on Thursday. It made a placement of $2.5 billion in shares to the privileged institutions close to the investment banks handling the deal. That was clearly to the disadvantage of small shareholders in the bank.
 
ASIC vows to tackle poor culture in finance industry
ASIC has vowed to tackle poor culture in the financial services industry, saying that a culture of poor conduct is a key driver in widespread mistrust in the industry.

In its half-yearly enforcement report, the regulator claims there needs to be a “fundamental shift” in the culture of the financial services industry, from “poor advice” and “mis-selling” to one that focuses on achieving and rewarding good outcomes for consumers.

“ASIC is committed to holding those who intentionally break the law to account so that trust and confidence in our financial services industry and markets is strong,” ASIC commissioner Greg Tanzer said.

“Poor culture is a key driver of poor conduct in the financial services industry. Given the strong connection between the two, tackling poor culture will be a major priority for ASIC over the next six months and beyond. We'll ensure that everyday Australians who suffer loss are remediated appropriately and as quickly as possible.”