CBA ‘falls short’ on climate policy

From InvestorDaily.

CBA released its first ‘Climate Policy Position Statement’ yesterday as part of its annual report, in which the bank committed to both decrease the intensity of its business lending and reduce its own emissions.

However, according to environmental financial group Market Forces, CBA has failed to honour its previous commitment to the Paris Agreement goal to limit global warming to 2 degrees.

Market Forces executive director Julien Vincent said CBA’s position statement demonstrated they were “not even pretending” to make an effort.

“Unlike the bank’s peers in Australia and overseas that are taking concrete steps to avoid the most carbon intensive sectors, Commonwealth Bank clearly lacks either the interest or competency to fulfil its commitment to help hold global warming below two degrees,” Mr Vincent said.

According to CBA’s position statement, the bank would “target an average emissions intensity decrease of our business lending portfolio consistent with our commitment to a net zero emissions economy by 2050”.

However, the Market Forces analysis suggested this statement was vague and lacking in detail.

“The wording of this statement is very concerning as it is aspirational but no hard targets are being set,” the analysis said.

“It also covers the bank’s entire business lending, leaving room for some sectors to increase while others decrease. It is also a target that could conceivably be met by adding more renewable energy to energy portfolios (which is of course positive) but not necessarily requiring reductions on exposure to fossil fuels.

“This offers no confidence whatsoever that Commonwealth will reduce its fossil fuel exposure.”

Mr Vincent said the policy statement left “the door wide open” to continue lending to fossil fuel projects.

“That in itself should be enough to conclude this flimsy document has no relationship with the goal of holding global warming to less than 2 degrees,” Mr Vincent said.

The analysis also compared CBA’s commitments in renewable energy lending with its peers and found it to be “a slightly lower commitment pro rata than those of the other major banks”.

In light of what Market Forces called a “dismal” position statement, the environmental group has declared its intention to lodge a shareholder resolution against the bank.

CBA provides an update on customer and employee review and remediation actions

CBA released another update itemising the status of a number of open compliance and other process issues and their remediation programmes. Clearly disclosure is on the minds of the CBA currently!

In the course of reviewing our products and processes and where we see issues, we report to our regulators and fix these for our customers. In addition to updates on a number of customer review and remediation programs in the Annual Report 2017 released today, we are providing an additional update on other issues we are putting right for our customers and employees. This is not an exhaustive list of all regulatory matters, however the following have now reached some key milestones:

Our review of superannuation payments

Earlier this year, we started a review of superannuation payable to our part-time employees working additional hours at single-time rates. As part of this review, we also expanded the scope to all employees and all types of payments going back eight years. This included looking at superannuation and the impact on leave and allowances paid since 1 July 2009 when the Australian Tax Office’s Superannuation Guarantee Ruling was issued.

This review is ongoing and the precise amounts are to be determined. The first tranche, which will commence shortly, is estimated to be $16.7 million plus interest, equating to an average amount per employee of approximately $463 plus interest. The expected total payments and program costs have been conservatively provided for in previous financial years.

We will be contacting the 36,000 current and former employees who are eligible for additional payments.

Refund for some Credit Card Plus insurance customers

In 2015, we identified that some customers who purchased Credit Card Plus insurance (providing cover for a range of circumstances) may not have met the employment criteria, meaning they may not, if the need arose, have been able to receive certain benefits under the policy. We self-reported this issue to the Australian Securities and Investments Commission in 2015, fixed the issue and began working with ASIC on a remediation program.

These customers remain eligible for various benefits of Credit Card Plus insurance such as Death and Terminal Illness, but may not have been eligible to receive benefits for Involuntary Unemployment, Temporary and Permanent Disability. It was not intentionally sold to customers who were not eligible. We have agreed with ASIC to refund these customers who were not eligible to receive these benefits for the period between 2011 and 2015. We will shortly commence refunding customers.

We expect the refunds to total approximately $10 million, including interest, for around 65,000 customers, with an average refund of approximately $154 including interest.

We will continue to engage with ASIC on their wider industry review into consumer credit insurance.

Refund for some Home Loan Protection insurance customers

In February 2016, we identified that some customers who had purchased Home Loan Protection insurance had been charged an incorrect premium amount or had incurred premium charges before the home loan was drawn down. Both issues were self-identified and reported to ASIC in 2016.

This investigation is ongoing, however so far we have refunded approximately 9,600 customers a total of approximately $586,000 including interest, with an average refund of approximately $61 including interest.

Essential Super

ASIC has expressed a concern that some customers may have been given personal advice rather than general advice during the sale of Essential Super. We continue to discuss this topic with ASIC.

Charges on disputed card transactions

In July 2017, we proactively notified ASIC that when refunding disputed transactions on customers’ cards, while the transaction itself was correctly reversed, certain charges associated with the disputed transactions were not always correctly adjusted. We reviewed the 4.5 million disputed transactions going back to 2009 and will shortly commence refunding approximately $5 million including interest for around 355,000 customers, with an average refund of approximately $14 including interest.

Deceased estates

Today, ASIC was notified about an issue affecting some insurance products, where for a number of accounts, a confirmation of the cancellation of an existing insurance policy may not have been sent to the deceased estate. At this stage, the number of customers impacted is expected to be below 1,000. We are currently undertaking a detailed investigation back to the year 2000 to confirm the number of affected customers and will contact their estates and remediate if appropriate.

All of the above amounts have been appropriately provided for in previous financial years.

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