ABA Ups The Ante On SA Bank Tax

 

The Australian Bankers’ Association’s new website – jobsnottaxes.com.au – launched today, invites the people of South Australia to email local members of Parliament to take a stand against the tax.

“South Australia needs jobs to grow its economy, not new taxes that will undermine this objective,” ABA Chief Executive Anna Bligh said.

“Over the past 10 years, full time jobs in South Australia grew by an average of 0.2 per cent per year, compared with 0.9 per cent across Australia.”

A new statewide Galaxy poll (Galaxy surveyed 801 people in South Australia between 8 – 12 September 2017 via telephone and online) conducted this month shows that 52 per cent of South Australians oppose the tax compared with only 38 per cent who support it. Half of people surveyed believe the tax would negatively impact on jobs in the state.

The website also features new television ads with members of the South Australian community urging the Government to dump the tax and focus on jobs and growth.

 

“In 2016, the five banks impacted by the proposed tax paid around $1.5 billion in dividends to shareholders in South Australia and lent $10 billion to South Australians to buy their own home,” Ms Bligh said.

“This is a tax on all South Australians and will impact shareholders, customers and bank employees,” she said.

 

 

… As Does Westpac

All the major banks have removed foreign ATM fees. The ABA welcomed the move.

Statement from Anna Bligh, Australian Bankers’ Association Chief Executive:

“The ABA welcomes the announcement from the major banks today to abolish ATM fees.

“It’s a boon for customers and makes banking more affordable for everyday Australians.

“This is the latest in a suite of initiatives by banks to create better products and services for customers and boost customer choice, including reducing interest rates on credit cards and offering fee-free transaction accounts.

“A competitive banking system is good for customers and good for the sector.”

The BEAR Roars!

The Treasury released the exposure draft of the Banking Executive Accountability Regime, open for consultation until 29th Sept 2017.

The Bill amends the Banking Act to establish the BEAR: an enhanced accountability framework for ADIs and persons in director and senior executive roles.

  • The BEAR imposes a clearer accountability regime on ADIs and people with significant influence over conduct and behaviour in an ADI. It requires them to conduct themselves with honesty and integrity and to ensure the business activities for which they are responsible are carried out effectively.
  • It does this by creating a new definition of ‘accountable person’. An accountable person is a Board member or senior executive with responsibility for management or control of significant or substantial parts or aspects of the ADI group.
  • The general requirement placed on accountable persons is framed in the context of their particular responsibilities. These will be clearly defined in accountability statements for each accountable person and an accountability map for each ADI group.
  • Accountability maps and statements are designed to give APRA greater visibility of lines of responsibility. The maps will clearly allocate responsibilities throughout the ADI group, to ensure that all parts or elements of the group are covered.
  • An ADI must comply with its BEAR obligations. These include new accountability, remuneration and key personnel obligations. An ADI must ensure that it has a remuneration policy consistent with the BEAR, its accountable person roles are filled and it has given accountability statements and maps to APRA.
  • ADIs must set remuneration policies deferring an accountable person’s variable remuneration to ensure accountable persons do not engage in behaviours inconsistent with BEAR obligations.
  • APRA will have additional powers concerning examination and disqualification to let it implement the BEAR.
  • If an ADI breaches its BEAR obligations, significant civil penalties may be imposed by a court.
  • Recognising there are different business models and group structures in the banking industry, the Bill uses both high level principles as well as prescribed detail. The BEAR will work with existing legislative and regulatory frameworks

The ABA were unimpressed in a statement from Anna Bligh, Australian Bankers’ Association Chief Executive:

“The seven day consultation period announced by the Federal Government on new banking executive accountability laws is grossly inadequate and playing fast and loose with a critical sector of the economy.

“The industry recognises that improving senior executive accountability is crucial for customers to have trust in banks.

“Banks want to work with the Federal Government to get this right, but just seven days to consult is not good enough.

“This is a significant piece of reform that impacts on the integrity of banks and the stability of the financial system and it needs thorough scrutiny.

“It’s an entirely new addition to the system of corporate governance in Australia. The Government’s timeframe risks serious unintended consequences.

“The ABA urges the Government to extend the consultation period and do the proper due diligence to ensure that the objective of improving senior executive accountability is met.”

 

Low levels of trust, confidence and transparency in the banking industry – ABA

The Australian Bankers’ Association has today released new research that measures and tracks community trust and confidence in banks.

Less than one third of those surveyed had high levels of trust in the banking industry. This is below the international benchmark.

There are significant differences in attitude between those who have higher levels of trust, and those who do not. Those with low trust scores believed the banks were drive by profit, not focussed on customer needs and had terms and conditions which are not transparent.

The research conducted by international firm Edelman Intelligence will be used by the industry to assess the impact of the wide ranging reform agenda currently underway across the sector.

“The research shows low levels of trust, confidence and transparency in the banking industry with a clear need for improvement,” according to ABA Chief Executive Anna Bligh.

“Interestingly, survey respondents report stronger levels of trust with their own personal banking experience (53 per cent) than they do with the industry as a whole (31 per cent).

“This points to a real opportunity for banks to translate the experience customers have with their own bank into higher levels of trust in the sector as a whole,” she said.

The Edelman Intelligence research has also measured the community’s knowledge of current industry-led banking reforms and their views of these reforms.

“While awareness of the reforms is low, respondents have a clear view that the reforms are on the right track to improve banking culture and customer experience,” Ms Bligh said.

“It is heartening that while challenges lie ahead for banks, customers are receptive to banks’ massive reform program.

“As a result of more than 20 inquiries, reviews and investigations into banks in the past two years, Australia’s banks are now implementing one of the largest reform programs in their history.

“Along with Federal Government reforms such as the new Banking Executive Accountability Regime, a new one-stop shop for complaints and substantial improvements to contracts for small business lending, the industry has initiated its own reforms which include a new Code of Banking Practice, new whistleblower protections and changes to staff remuneration.

“It’s a big program of transformation and future benchmarking will look at the full breadth of changes that are underway,” Ms Bligh said.

Anna Bligh will today outline to the Good Shepherd Microfinance Conference in Melbourne the importance of measuring and benchmarking trust in banks.

“It is critical to the whole banking industry that real progress is made in rebuilding trust and respect with the community,” she said.

“The fact that this research has been done, that it is being set as a tangible benchmark and being made public, is an indication the banking sector is serious about reform and prepared to be held accountable.”

Key findings from the report include:

  • When asked to rate the importance of the initiatives in making banking better, each initiative scored between 62 and 75 per cent.
  • The initiatives that will have the greatest impact on trust are strengthening the Code of Banking Practice and changing the way bank staff are paid.
  • Respondents are most aware of actions their main bank has taken in relation to the removal of individuals from the industry for poor conduct (53 per cent), followed by a strengthening of commitment to the Code of Banking Practice (51 per cent).
  • Based on the 2017 Edelman Global Trust Barometer, Australians’ trust in the financial services sector has increased slightly, but is still four points behind the global average.

“Banks are trusted when they’re considered stable, well-regulated and reliable. This research shows just how much more work needs to be done before trust in bank culture and conduct reach stronger levels than seen in this research,” Ms Bligh said.

“The research will be conducted regularly to assess progress and identify areas for further reform.”

The Edelman Intelligence research consisted of an online survey of 1,000 Australians and 12 focus groups between May and June 2017. More information is available in the report.

SA to face High Court challenge over bank tax

From The ABA.

Australia’s major banks have resolved to mount a challenge to the SA bank tax if it is legislated, the Australian Bankers’ Association announced today.

“The South Australian Government will face a High Court challenge if it introduces its proposed bank tax,” ABA Chief Executive Anna Bligh said.

“South Australia is a state that needs to create more jobs and encourage businesses to invest, not introduce new taxes,” she said.

Recent polls of more than 2000 voters and 400 business owners in South Australia showed widespread opposition to the tax and concern about its impact on jobs.

“Banks are campaigning against the tax because it is not in the interests of South Australians, and they are prepared to fight it in court,” Ms Bligh said.

“Other states will also face a Constitutional challenge in the High Court if they propose to single out banks for new taxes.

“There is no justification for new taxes on Australia’s major banks. Banks are already the nation’s largest taxpayers, contributing $14 billion in taxes last year.

“On top of that, banks paid $26 billion in dividends to shareholders and superannuation funds in 2016.

“That’s a benefit to almost every working Australian and new taxes on banks will erode this benefit,” she said.

Banks commit to negotiating commission changes

From Mortgage Professional Australia.

The Australian Bankers Association wants commissions to be decoupled from loan size but is prepared to negotiate with brokers to find a new model, it has announced.

In an exclusive interview with MPA, the ABA talked through its submission to the Treasury and its views on commissions, volume related bonuses, soft dollar and self-regulation. “The ABA doesn’t have any preconceived ideas about the exact figures of the new [commission] model: what we are doing is working through the combined industry forum,” an ABA spokeswoman told MPA.

The combined industry forum, which involves the ABA, MFAA, FBAA and COBA, first met in June and is scheduled to meet later this month, with the broad objective of responding to ASIC’s remuneration review. Participants hold a range of different views, with the ABA telling MPA that “we do believe that the standard commission model will need to be de-linked from loan size”

However, the ABA played down suggestions of major changes to commission: “we don’t think that the concept of upfront and trail should be abandoned: we think that the entire model needs to be considered in the light of what promotes good customer outcomes”

Under the shadow of Sedgwick

The recommendations of the Sedgwick Review look likely to determine the ABA’s stance on questions of remuneration.

The ABA says Sedgwick’s recommendations ‘intersect’ with those of ASIC: Sedgwick called for commissions to be completely decoupled from loan size by 2020, but the ABA told MPA this was a final deadline: “banks are taking immediate steps to see how they can implement the Sedgwick recommendations but are we mindful about how these can be worked through with the rest of the industry.”

Although previously criticised for taking unilateral action, the ABA stated that “in terms of activity outside the forum, the ABA’s energy is invested in pursuing the objectives of the forum and our member banks are also committed to implementing the recommendations of the [Sedgwick] Review.”

ABA supports self-regulation

The combined forum has been portrayed by MFAA CEO Mike Felton as a potential basis for industry self-regulation and the ABA hesitantly support this view.

Although the initial objective of the forum was to respond to ASIC, the ABA told MPA, its purpose did “not necessarily” end there: “depending on the Government’s response and acceptance of the solution, we would look at self-regulatory mechanisms to implement it.” In principle the ABA supports self-regulation on the basis it can drive change “more quickly, and avoid unintended outcomes for industry and consumers.”

Consumer advocates criticised self-regulation for inadequately representing consumer interests. However, the ABA told MPA this was unfair: “an immediate objective of the forum is to set up an appropriate and responsive channel to socialise our thinking with consumer groups and obtain their feedback. We’ll be acting on that quickly: it’s not in response to the submission: it was always our intention of the forum.”

Banks Pay The Most Tax – ABA

The Australian Bankers’ Association has today released a new report showing the banks targeted for a new tax in South Australia are actually among the highest corporate taxpayers in the country.

“South Australian Treasurer Tom Koutsantonis claims that a new tax will ensure ‘the sector contributes its fair share’, despite the fact that the industry paid over $14 billion in tax last year alone,” ABA Executive Director – Industry Policy Tony Pearson said.

“In terms of tax paid, it is banks first, daylight second. Banks make the highest contribution by far to help governments at all levels fund essential public services such as hospitals, schools and roads, and income support for those in need.”

The report, Taxes and other levies paid to governments in Australia by the banking industry, shows that in 2016 banks contributed over half of all income tax paid by the top 200 ASX companies.

“The Weatherill Government simply doesn’t get it,” Mr Pearson said.

“The banking industry makes a vital contribution to the community. Banks employ 140,000 people around the country – around 8,000 of those in South Australia.

“In 2016, banks paid $25 billion in wages and salaries to staff, $26 billion in dividends to shareholders – many of whom are mums and dads – and $66 billion in interest on bank deposits and bonds,” he said.

A copy of the report is available here.

ABA Says Growth in Fees Paid by Households and Businesses Remains Low

On the day the RBA published its analysis of banking fees, the Australian Bankers Association also released their report.

The ABA’s report is based on the RBA’s banking fees survey. The ABA data is different to the RBA data for personal loans, (and hence aggregate fees paid by households), because of a discrepancy in the treatment of data for personal loans for one bank. This results in ABA data showing aggregate fees paid by households were flat while RBA shows a very small rise. The RBA has included the full amount of the discrepancy in their data this year, while the ABA did not have sufficient information to allocate the data accurately. Both the ABA and RBA will review the treatment of this discrepancy next year.

Total bank service fees increased slightly to $12.5 billion in 2016, but increased less quickly than bank activity.

Fees paid by households were broadly unchanged at $4.3 billion in 2016. They averaged around $9.00 per week for each household and have changed little in five years.

Fees paid by businesses increased by 1.5 per cent to $8.2 billion in 2016, but remained well below the peak of 2007.

What is missing from both the RBA and ABA report is segmented analysis. For example, the RBA says SME’s bear significant loan fees, and there is no analysis of which households pay more, or less. We think bank fees vary across households, and exception fees hit a small but significant portion of households. Averages are relatively meaningless.

Exception fees, which include include late payment fees and over-the-limit fees, accounted for 5.8 per cent of all bank service fees this year. A total of $724 million in exception fees were paid by households and businesses over 2016 – an increase of 5.6 per cent or $38 million. Households paid $611 million in fees while businesses paid $113 million. This is an increase of $8 million for households and $83 million for businesses.

The number of customer transactions, loans and accounts are increasing but growth in fees paid by households and businesses remains low, the Australian Bankers’ Association said today.

“The past year has seen little change in bank fees paid by households, at the same time as more than 900,000 new home loans were provided by banks, and half a million new credit card accounts were opened,” ABA Chief Executive Anna Bligh said.

“This is due to a combination of factors including strong competition, more low-fee and no-fee products being offered, and the industry’s efforts to educate customers about how to minimise the fees they pay.”

The ABA report1 released today, Fees for banking services, shows the average weekly bank fees paid by households is $9, the same amount it has been over the past five years.

“We know how important transaction accounts are for bank customers to do their day-to-day banking and virtually every Australian has one. Pleasingly, the amount households paid in 2016 in fees for their transaction accounts was at its lowest level in 15 years.

“At the same time, we’re seeing more people using their transaction accounts more often,” Ms Bligh said.

“Also, mortgage fees relative to the number of home loans provided to customers were the lowest on record and fees for credit cards relative to the amount of credit accessed remained at the lowest level in more than a decade.”

Ms Bligh said bank fees paid by businesses for loans were also low when compared to the increase in lending.

“Over the past year, the increase in fees of 2.4 per cent was well below the 8 per cent increase in business loans.

“Large businesses accounted for 58 per cent of bank service fees from business loans,” she said.

Other key findings include:

  • Fees as a proportion of banks’ operating income is 13 per cent, well below the peak of 18 per cent in 2003.
  • Credit card fees as a proportion of the total balance outstanding is 3.7 per cent, which is around the same as the past 10 years.
  • Bank fees relative to their assets (the bulk of which is loans) is at a record low of 0.37 per cent.

Banks and brokers in remuneration talks

From The Adviser.

Representatives from the mortgage broking industry have met with the Australian Bankers’ Association to discuss proposed remuneration reforms.

The ABA, which instigated the highly contentious Sedgwick review, met with the Mortgage and Finance Association of Australia (MFAA), the Finance Brokers Association of Australia (FBAA) and the Customer Owned Banking Association (COBA) on Friday, and held a discussion forum with key industry participants including bank and non-bank lenders, aggregators and brokers to progress reform.

The forum, held on Friday, 9 June in Sydney, was recognised by participants as an opportunity for the industry to understand the key issues in response to ASIC’s proposals for mortgage broking; the potential impact to aggregators and lenders; and the overlap with the Sedgwick review.

While the ABA has given little information about what was discussed, the association’s executive director of retail policy Diane Tate said the meeting was “an important step” for the industry to work together on options for an industry-based response to calls for changes in the mortgage industry.

“We have heard these calls to change incentives and governance arrangements and we look forward to working with the industry, in consultation with the government and subject to all competition law obligations, on reforms to support good customer outcomes,” she said.

The FBAA’s Peter White said the forum was “a unique step forward” for the third-party channel.

MFAA chief executive Mike Felton said the discussions are a “crucial step” in the process of determining how the industry responds to the challenges of addressing ASIC’s proposals on broker remuneration, ensuring the sustainability of the industry going forward.

“This meeting demonstrates that our industry is serious about self-regulation and has the maturity to work together across different stakeholder groups to effect the required change and ensure customer outcomes continue to remain front of mind,” Mr Felton said.

Both the FBAA and MFAA were scathing in their reponse to the Sedgwick review, which included a number of proposed changes to the way brokers are paid.

Following the release of the report, Mr Felton said the association was “frustrated” by Sedgwick’s proposals, which he said were essentially recommending a consolidation of power to lenders, giving them complete oversight of mortgage brokers.

“This would lead to a reduction in independence, would do little to enhance competition and tip an already precarious power balance further towards the big four and away from consumers’ interests,” he said.

Meanwhile, the Mr White said the release of the ABA-funded Sedgwick review was making recommendations to banks, which “seem to be taking it as gospel”, and influencing regulators before any decision has been made by ASIC, Treasury or the minister.

“The banks and the ABA unquestionably must stop this attempted regulatory manipulation through the Sedgwick report and allow the works of ASIC and Treasury, and then the minister, to make the appropriate determinations without manipulation driven by self-interest, greed and poor consumer and industry outcomes,” he said.

The FBAA, MFAA and ABA will hold further discussions in the coming months, with all participants committing to work in consultation with Treasury and government stakeholders on an industry-led response.

Significant Questions Remain on Bank Tax – ABA

The legislation for the major bank levy introduced today shows the Federal Government’s original design had major flaws and significant questions remain on how this rushed legislation will affect the economy, the Australian Bankers’ Association said today.

“The Government has been forced to make concessions to the bank levy following the banks’ one and only opportunity to meet with Treasury on such a major Budget measure,” ABA Chief Executive Anna Bligh said.

“Banks welcome the concessions which would have had unintended consequences across the financial system, but despite these changes, major banks remain concerned about the Government’s poorly-designed tax grab,” she said.

The legislation, revealed to the public for the first time today, showed the levy will no longer apply to:

  • Derivative transactions, which banks use to minimise their risk.
  • Money the banks hold with the RBA.

Banks had argued for both of these changes.

“This is a tax on all Australians even with these changes. The Government’s own analysis released today acknowledges that the impact of this tax could hit “bank borrowers, lenders, shareholders or some combination of these groups”1,” Ms Bligh said.

“This levy will impact on investor confidence in Australia’s major banks and make it more expensive for banks to raise the money they need to lend to businesses and individuals,” she said.

“The major banks’ market value has already fallen by around $39 billion since the Budget.”

Despite these changes the Government still maintains that the levy will raise $6.2 billion over the four years of forward estimates in the Budget.

“Treasury has not provided sufficient modelling to explain their calculations in the Budget. At this stage, we are still uncertain just how much the levy will raise.

“There is no sunset clause which is unfair to those who will be impacted by the tax. One of the rationales for the levy is that it will contribute to budget repair,” Ms Bligh said.

“If that is the case then let’s be fair and remove the tax once the budget is back in the black.”