Westpac Affirms Wealth Management Focus

Westpac briefed the market yesterday on BT Financial Group, its wealth management division and reaffirmed that Wealth remains a strategic priority for the Group and it was continuing to invest to grow the business.

They showed this picture of financial products over the lifetime.

They argued that there will be strong growth in superannuation (faster than credit growth) and returns above the the Institutional Bank.  18.5% of Westpac Group customers have at least one BT Financial Group product although individual segment shares are small.

Finally, they reinforced their mobile strategy.

BT Financial Group (BTFG), Chief Executive, Brad Cooper, said the Group’s strategy was to provide superior service and that required looking after all of a customer’s financial needs throughout their life.

“Having a strong wealth and insurance operation is imperative to deliver this and BTFG has invested to transform its operations to help more Australians plan for their best financial futures,” he said.

Mr Cooper said while the industry is facing some near term headwinds from volatility and the uncertainty and costs associated with regulatory change, the longer term prospects are very positive. This is particularly true with superannuation balances expected to grow at around 8% per annum over the next decade.

“There is an increasing awareness of the need to fund retirement by Australians. Currently financial advice is only being accessed by one in five people. Add to that superannuation assets doubling to around $4 trillion over the next nine years and there is an obvious need to help more Australians into a dignified retirement,” he said.

“We have been improving our market leading wealth solutions across our business to better help customers through all life stages. Customers are rightly demanding more convenience, flexibility and the ability to be helped on their terms and we have reshaped our business and built the tools to meet these needs.

“This has included a new flexible advice model that offers everything from general and single-topic advice to full personal advice delivered when and where the customer wants, a partnership with Allianz to broaden our general insurance product set, and a new Super Check service that has helped 5,400 customers consolidate around $100 million of their retirement savings.

“Our investment in BT Panorama has created the most advanced Wealth platform in the country for both advisers and customers. For the first time, customers can view and transact seamlessly right across all their financial services in one place. This includes banking transactions, savings, credit cards, home loans, insurance, superannuation and investments.

“Within Panorama, customers can pick and choose from a wide range of investment options – from the simple, through to the more advanced – based on an individual’s objectives, financial situation and needs,” he said.

Mr Cooper also referenced BTFG’s life insurance business as a standout industry performer. Our customer focused strategy and prudent approach to risk has seen us avoid the more recent claims issues experienced by other life insurance participants.

“Life is an integral part of our product set and our business is strong,” he said.

“We have a disciplined approach to how our products are distributed, with most sold through an adviser, as we believe that life insurance is a complex product that needs either personal or general advice to support it.

“Additionally, our strong policy framework and transparent claims management processes has further strengthened our business. Our claims philosophy has consistently focused on customer wellbeing, with attention given to early intervention and rehabilitation so customers can return to work as quickly as possible. This approach has seen us routinely recognised by claimants, and the industry, as having the best Claims team,” he said.

Westpac announces changes to variable interest rates

As expected Westpac today announced changes to interest rates across a range of variable lending products for home owners and investors.

  • Variable home loan rate for owner occupiers will increase by 0.03% to 5.32% per annum for customers with principal and interest repayments1;
  • Variable home loan rate for owner occupiers will increase by 0.08% to 5.49% per annum for customers with interest only repayments;1
  • Variable residential investment property loan rate will increase by 0.23% to 5.79% per annum for customers with principal and interest repayments1; and
  • Variable residential investment property loan rate will increase by 0.28% to 5.96% per annum for customers with interest only repayments1.

George Frazis, Chief Executive of Westpac Consumer Bank, said today’s decision takes into account a number of economic and regulatory factors.

“Today’s changes are in response to increasing funding costs. Despite home loan interest rates being at historically low levels, both deposits and wholesale funding of mortgages have increased over the last nine months.

“We understand the significance of interest rate changes to our home loan customers, so we take a very careful approach to these decisions,” Mr Frazis said.

“We try to balance the needs of both owner occupiers and investors in making these decisions while continuing to provide customers with a competitive offering across our range of products.

“Importantly, we are offering lower interest rates to customers who make principal payments to encourage customers to pay down their home loan in this low interest rate environment.”

Customers with interest only home loans who wish to move to principal and interest repayments can do so without paying a switching fee until 17 June 2017.

Variable lending products for small businesses will also increase by 0.08%2.

1 Changes are effective 24 March 2017.

2 Changes are effective 3 April 2017.

ASIC accepts enforceable undertakings from Westpac and ANZ to address inadequacies within their wholesale FX businesses

ASIC says it has today accepted enforceable undertakings (EUs) from Westpac Banking Corporation (Westpac) and Australia and New Zealand Banking Group Limited (ANZ) in relation to the banks’ wholesale foreign exchange (FX) businesses.

As a result of ASIC’s investigation, ASIC is concerned that between 1 January 2008 and 30 June 2013, both banks failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC.

ASIC Commissioner Cathie Armour said, ‘The foreign exchange market is a systemically important market that depends on all participants acting with integrity and fairness. ASIC is committed to ensuring that major financial institutions have the systems in place to ensure that financial services are provided fairly, honestly and efficiently.’

Westpac

ASIC identified the following conduct by employees of Westpac in its spot FX business between 1 January 2008 and 30 June 2013:

  • on several occasions, Westpac employees disclosed confidential details of pending client orders to external traders in the spot FX market, including on a few occasions identification of the client by use of code names;
  • on at least one occasion, a Westpac employee acted together with an external party to share confidential information and enter and cancel offers on a trading platform other than in the ordinary course of hedging or market making;
  • on several occasions, Westpac employees inappropriately received and/or disclosed confidential information about Westpac’s or another institution’s orders in the course of fix order management and execution;
  • on one occasion, a Westpac employee altered a proprietary position prior to the fix upon receipt of confidential and potentially material information in relation to other institutional fix orders; and
  • on at least one occasion, a Westpac employee inappropriately disclosed confidential Westpac fix order information to an external party to inform their joint personal account trading strategy.

ASIC is concerned that Westpac did not ensure that its systems, controls and supervision were adequate to prevent, detect and respond to such conduct, which had the potential to undermine confidence in the proper functioning and integrity of the market.

Under the EU, Westpac will develop a program of changes to its existing systems, controls, monitoring and supervision of employees within its spot FX business to prevent, detect and respond in relation to:

  • disclosure of confidential information to external market participants;
  • inappropriate order management and trading, including fix orders and the entry or cancellation of offers on an electronic trading platform other than in the ordinary course of hedging or market making activities; and
  • inappropriate personal trading.

The program and its implementation will be assessed by an independent consultant appointed by ASIC. The program will incorporate changes already made by Westpac as part of an existing review of its spot FX business.

Upon implementation of that program, for a period of three years, Westpac will provide to ASIC an annual attestation from a senior executive that the systems and controls in its spot FX business are appropriate and adequate to effectively prevent, detect and respond to specified matters. The program will also be subject to annual internal reviews and assessment by the independent consultant for a period of three years.

Westpac will also make a community benefit payment of $3 million to support the financial capability of vulnerable people including women experiencing family violence, the elderly and youth at risk.

ANZ

ASIC identified the following conduct by employees of ANZ in its spot FX business between 1 January 2008 and 30 June 2013:

  • on a number of occasions, ANZ employees disclosed specific confidential details of pending customer orders to external third parties including the identification of the customer through the use of code names;
  • on at least one occasion, a former ANZ spot FX trader exchanged with an external market participant confidential and potentially material information about other institutions’ customer flow or proprietary positions, including information concerning likely directional flow at the WM/R London 4pm fix, which was potentially inconsistent with a proper approach to market making or hedging. Following the receipt of such information, the ANZ trader acquired a proprietary position in a currency prior to the WM/R London 4pm fix; and
  • on a number of occasions, ANZ employees who were responsible for managing particular client orders traded in a manner which was potentially inconsistent with a proper approach to market making or hedging.

ASIC is concerned that ANZ did not ensure that its systems, controls and supervision were adequate to prevent, detect and respond to such conduct, which had the potential to undermine confidence in the proper functioning and integrity of the market.

Under the EU, ANZ will develop a program of changes to its existing systems, controls, training, guidance and framework for monitoring and supervision of employees in its spot FX and non-deliverable forwards businesses to prevent, detect and respond to:

  • disclosures of confidential customer and potentially material information; and
  • inappropriate order management and trading while in possession of confidential and potentially material information.

The program and its implementation will be assessed by an independent consultant appointed by ASIC. The program will incorporate changes already made by ANZ as part of ongoing reviews of its businesses.

Upon implementation of that program, for a period of three years, ANZ will provide to ASIC an annual attestation from its senior executives that the systems and controls in its spot FX and non-deliverable forwards businesses are appropriate and adequate to effectively manage conduct risks relating to specified matters. The program will also be subject to annual internal reviews and assessments by the independent consultant for a period of three years.

ANZ will also make a community benefit payment of $3 million to Financial Literacy Australia.

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ASIC encourages market participants to adhere to high standards of market practice, including those set out in the Global Code of Conduct for the Foreign Exchange Market, published by the Bank of International Settlements (BIS Global FX Code). The BIS Global FX Code provides a global set of practice guidelines to promote the integrity and effective functioning of the wholesale FX market. Phase 1 of the Code was published in May 2016, and Phase 2 is due for publication in May 2017.

ASIC is grateful for the assistance of our international regulatory counterparts in progressing our investigation, including the UK Financial Conduct Authority, the NZ Financial Markets Authority and the Monetary Authority of Singapore.

Background

Prior to accepting these EUs from ANZ and Westpac, ASIC’s FX investigation has seen ASIC accept enforceable undertakings from each of the National Australia Bank Limited and the Commonwealth Bank of Australia (refer: 16-455MR). The institutions also made voluntary contributions of $2.5 million each to fund independent financial literacy projects in Australia.

The wholesale spot FX market is an important financial market for Australia. It facilitates the exchange of one currency for another and thus allows market participants to buy and sell foreign currencies. As part of its spot FX business, Westpac and ANZ entered into different types of spot FX agreements with its clients, including Australian clients.

Spot FX refers to FX contracts involving the exchange of two currencies at a price (exchange rate) agreed on a date (the trade date), and which are usually settled two business days from the trade date.

Non-deliverable forwards refer to FX forward contracts which, at maturity, are settled by calculating the difference between the agreed forward rate and a settlement rate (which is usually determined by reference to a benchmark published exchange rate). A FX forward contract is an agreement between two counterparties to exchange currencies at a future date at a rate agreed upon in advance.

Westpac Plans to Launch Low Rate No Frills Credit Card

During today’s evidence to the House Standing Economics Committee, Westpac CEO Brian Hartzer confirmed they are planning to launch a no-frills (e.g. no travel insurance) credit card with an interest rate below 10% and a limit of somewhere between $2,000 and $4,000 depending on ability to repay. The launch is expected within the next 2-3 months.

Westpac just one of 11 Lenders in ASIC home loan investigation

As reported by the ABC, ASIC says it has been investigating up to 11 banks over their home lending practices, amid concerns loans are being given to people that cannot afford to repay them.

Appearing before Senate Estimates, the Australian Security and Investments Commission (ASIC) was questioned about its Federal Court action against Westpac, announced yesterday.

ASIC’s senior executive responsible for banking, Michael Saadat, said the inquiries have been underway for a couple of years.

“It started really when we conducted our review of interest only loans in 2015,” he said.

“We looked at the conduct of 11 lenders.

“We have announced action against Westpac but we have been in discussions with other lenders and we hope to make an announcement about the work that we’ve been doing with other lenders in the next few weeks.”

Mr Saadat added that Westpac had changed its lending practices after the regulator made its concerns known in 2015.

“Despite the fact that they stopped the practice … we’ve decided to bring this action because of the importance of the issues that it raises,” he said.

Westpac not alone

It’s a fair bet all four major banks are facing ASIC scrutiny over poor home loan approval practices.

In a statement yesterday, Westpac said the loans identified by ASIC are all meeting or ahead on repayments.

However, ASIC said its action is intended to head-off possible future risks for consumers and the financial system.

“One of the aims of the responsible lending legislation is to enable ASIC to take action before the problems manifest themselves,” explained the regulator’s deputy chairman Peter Kell.

ASIC’s chairman Greg Medcraft said a key motivation for the regulator was to get other banks to change their ways.

“The issues is deterrence, and when you lodge a case it’s not just for that party, it’s to send a message to the broader sector,” he said.

ASIC said the maximum civil penalty that a court could award for breaches of the responsible lending laws is $1.7 million per contravention.

Westpac currently stands accused of seven contraventions of the law.

Here is Westpac’s media release about the matter:

Westpac will defend Federal Court proceedings commenced by ASIC in relation to a number of home loans entered into between December 2011 and March 2015, including specific allegations made by ASIC regarding seven loans. The court action does not concern Westpac’s current lending policies or practices.

Of the seven specific loan applications ASIC references in its proceedings, all loans are currently meeting or ahead in repayments.

Westpac Group, Chief Executive, Consumer Bank, George Frazis said Westpac takes its responsible lending obligations seriously and has confidence in its lending standards and processes. Our objective is to help more Australian families into their homes in a responsible way.

“It is not in the bank’s or customers’ interests to put people into loans that they cannot afford to repay. It goes hand in hand that we have robust credit approval processes while helping customers purchase their home.

“Our credit policies are informed by our deep experience and understanding of the mortgage market.

“They include a consideration of customers’ specific circumstances, including income and expenditure, previous repayments history and the overall customer relationship. We build into our processes a range of conservative inputs, including the addition of buffers to take into account possible future interest rate increases.”

Mr Frazis said Westpac uses sophisticated systems as part of its rigorous credit approval process. This includes utilising benchmarks such as the Household Expenditure Measure (HEM), published by the Melbourne Institute for Social and Economic Research, which provides broad analysis of customer expenditure based on demographic criteria.

“In our experience this survey is a useful input into our loan assessment process, in combination with our understanding of customers’ circumstances.”

Westpac disputes ASIC’s claims that Westpac relied solely on the HEM benchmark and did not have regard to a customer’s declared expenses in its unsuitability assessment.

“The Australian residential market is dynamic and we are constantly reviewing and refining our credit policies.”

“Importantly, interest-only mortgages were assessed in the same way as a standard principal and interest loan, and did not increase how much a customer could borrow.

“We are committed to meeting our responsible lending obligations and servicing the needs of customers, including prompt credit approval, which enables our customers to responsibly purchase their home with confidence,” Mr Frazis said.

 

ASIC commences civil penalty proceedings against Westpac for breaching home-loan responsible lending laws

This is a big deal. Westpac is the largest investment mortgage lender, and it  highlights the need for “microprudential” analysis of loans. But in 2011 other lenders were doing the same. The question of interest only repayments is certainly a live issue.

ASIC says it has today commenced civil penalty proceedings in the Federal Court against Westpac Banking Corporation (Westpac) for a number of contraventions of the responsible lending provisions of National Consumer Credit Protection Act 2009 (Cth) (the National Credit Act).

ASIC alleges that in the period between December 2011 and March 2015 Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.

Specifically, ASIC alleges that Westpac:

  • used a benchmark instead of the actual expenses declared by borrowers in assessing their ability to repay the loan
  • approved loans where a proper assessment of a borrower’s ability to repay the loan would have shown a monthly deficit
  • for home loans with an interest-only period, Westpac failed to have regard to the higher repayments at the end of the interest-only period when assessing the borrowers’ ability to repay.

The National Credit Act provides consumer protections to ensure that credit providers make reasonable inquiries about a borrower’s financial situation and assess whether a loan contract will be unsuitable for the borrowers.

The first hearing for the proceedings will be on 21 March 2017 at 9.30am in the Federal Court in Sydney.

ASIC will be making no further comment at this time.

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Background

The proceedings follow ASIC’s review of interest-only home loans (REP 445) in which ASIC reviewed the responsible lending practices of 11 lenders (refer: 15-220MR).

ASIC takes Westpac to court over alleged breaches of ‘best interests’ test

From The NewDaily.

The Australian Securities and Investments Commission is taking action against Westpac in the Federal Court on Thursday, alleging that two of the bank’s subsidiaries breached “best interests” obligations and provided personal financial advice when they were not permitted to do so.

ASIC claims that a campaign by Westpac designed to get customers to consolidate multiple super accounts breached the financial advice laws by giving advice based on personal financial information in 15 phone conversations.

The calls were made by staff of Westpac Securities Administration Limited and BT Funds Management Limited.

ASIC claims the bank specifically recommended customers roll out of their non-Westpac superannuation funds, consolidating into Westpac-related superannuation accounts. It also says the bank did not provide proper comparisons between the funds.

Westpac claims it did not give personal advice.

“In each of the 15 conversations … our customers were given a ‘general advice warning’ as is standard and a required part of our process,” BT said in a statement.

ASIC is also taking the gloves off over aggressive marketing by super funds, with the corporate regulator poised to launch enquiries with over 50 super groups.

The funds, believed to be mostly from the for-profit retail sector, will receive letters from ASIC in coming days seeking information about their marketing practices, a spokesman told The New Daily.

Were inducements offered?

ASIC is concerned that funds have been using inducements and high-pressure tactics to get employers to sign them up to lucrative default fund agreements which include insurance arrangements. These agreements channel workers into membership if they don’t actively choose another fund.

The regulator’s inquiries will investigate the quality of advice and information that is provided to employers by trustees when they are making decisions about their default funds for their employees. It will examine the funds’ responses to its questions before deciding on further action.

“We’ll be looking at all of the material around the super fund trustee relationship including the type of marketing collateral funds give to employers,” Gerard Fitzpatrick, senior executive leader of investment managers and superannuation at ASIC, told Fairfax Media.

There have been allegations of inducements offered to employers by funds and that these can result in employees being channelled into inappropriate funds.

What deals are members getting?

“We are very interested in how members are treated, and if as a result of aggressive marketing approaches or competitive drive, whether members are being disadvantaged or are being provided with information that does not allow them to make appropriate investment decisions.”

Areas that will come under ASIC scrutiny will include “advice given to employers and how this is paid for, as well as looking at disclosure material that is provided directly for employers by trustees and entities”.

Around one-third of Australians with super accounts are enrolled in default funds through their employers.

Competition for default fund status is hotting up in the $2.1 trillion super sector with employer-owned funds increasingly vacating the field and handing the business to dedicated industry and retail funds.

According to Australian Prudential Regulatory Authority data only 31 out of a total of 231 funds were identified as “corporate funds” for the year to June 2015.

The latest manifestation of this trend is news that Equip Super is set to merge with mining giant Rio Tinto’s corporate super fund later this year in a move that would see a $13.5 billion super group created to manage funds for approximately 75,000 members.

Last August the Reserve Bank of Australia moved its super balances over to Sunsuper to manage. BHP Billiton has also rolled its super fund into MLC.

ASIC takes action against Westpac entities

ASIC says it has commenced civil penalty proceedings in the Federal Court against Westpac subsidiaries Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM) for a number of contraventions, including failures of the ‘best interests duty’ introduced under the Future of Financial Advice reforms.

The proceedings follow an ASIC investigation into Westpac’s telephone sales campaigns targeting superannuation fund members. Specifically, ASIC’s case sets out 15 examples of alleged contraventions of the ‘best interests duty’ arising from two telephone campaigns instigated by WSAL and BTFM.

ASIC alleges that during the two telephone campaigns, WSAL and BTFM provided personal financial product advice to customers, specifically recommending that customers roll out of their other superannuation funds into their Westpac-related superannuation accounts. WSAL and BTFM are not permitted to provide personal financial product advice under their Australian financial services licences. Further, ASIC alleges that WSAL and BTFM did not undertake a proper comparison of the superannuation funds as required by law.

The law provides enhanced consumer protections and imposes greater obligations on financial advice licensees when they provide personal advice.

ASIC also alleges that WSAL and BTFM have:

  • failed to do all things necessary to ensure that the financial services covered by their  licences are provided efficiently, honestly and fairly;
  • failed to comply with the conditions of their licences which only permits those licensees to provide general advice; and
  • failed to comply with the financial services laws in the Corporations Act.

ASIC and Westpac will continue to cooperate to limit the facts in dispute in the proceedings. The first hearing for the proceedings will be on 2 February 2017 at 9.30am in the Federal Court in Sydney.

These proceedings form part of ASIC’s Wealth Management Project, focusing on the wealth divisions of the major banks, AMP and Macquarie (refer: 15-081MR).

Westpac Ups Interest Only Rates

Alongside NAB’s rate hike, Westpac also announced a lift in their interest only mortgage rates for investors. They also highlight switching to a principal and interest repayment loan offers a lower rate.

westpac-atm-pic

Effective 16 December 2016, Westpac will increase the interest rates of some of its Interest Only variable home lending products, including:

  • Variable home loan (owner occupier) rate for customers with Interest Only repayments: by 0.08% to 5.41% per annum (comparison rate 5.55% per annum*);
  • Variable residential investment property loan rate for customers with Interest Only repayments: by 0.08% to 5.68% per annum (comparison rate 5.82% per annum*).
  • Equity Access loan rate: by 0.15% to 5.80% per annum.

Our interest rates are constantly under review, as market and economic conditions change.

Switching from Interest Only to principal and interest repayments

We offer lower interest rates to customers who make  principal and interest repayments to encourage them to pay down their debt and own their home faster.

If you wish to pay your home loan sooner by switching to principal and interest repayments, you can do so by contacting us on 132 558 and we’ll talk through your options.

Customers with Premier Advantage Package can switch at any point in time at no additional cost.

Impact on my repayments?

For Interest Only home loans, your repayments are adjusted automatically. The repayments will change from the first repayment date after the interest rate change becomes effective.

Westpac online banking back after four days

From IT Wire.

Westpac’s online banking service has been on the blink for the last three days, with users unable to process payments and update balances.

westpac-atm-pic

On a Web page meant to keep customers abreast of the technical difficulties, the bank wrote: “We’re continuing to address intermittent issues with transactions, balances and Get Cash in Mobile and Online banking.

“We’re sorry for the inconvenience caused and we are working to fix this issue.”

People can log in to online accounts at times but the balances shown are way out of whack.

Update, Sunday 6pm: A Westpac spokesman told iTWire: “Our systems are currently running normally. Transactions and transfers are processing, and account balances are updating in Online and Mobile Banking.

“We’re so very sorry this has inconvenienced many of our customers, and we’d like to thank them for their patience.”

The bank said any fees incurred as a result of these issues would be refunded. It added that the Westpac Live issues (intermittent) started on Wednesday evening and stabilised at lunchtime on Saturday.