By Jill Fraser for Lending Central

US President Barack Obama announced today his proposal to limit the size and scope of America’s largest and most powerful financial institutions.

Obama, who has just entered his second year of office, spelt out changes that would prohibit banks and bank holding companies from owning or sponsoring a hedge fund or private equity fund and from participating in proprietary trading.

Declaring that America’s biggest banks had almost brought the economy to its knees by taking “huge, reckless risks in pursuit of quick profits and massive bonuses”, Obama says he wants “simple” and “commonsense” reforms.

Referred to by many as a vote-winning populist move, ABC’s AM reporter, Kim Landers describes it as “the latest attempt by the White House to harness popular anger at massive Wall Street bonuses and tight credit markets, as Congress heads to a crucial election year”.
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By Jill Fraser

Speaking to Lending Central about his push to benchmark the cost of banks’ wholesale funding Yellow Brick Road chairman, Mark Bouris said that the four majors’ recent move to increase their fixed rate is a worrying sign.

“That tells you they’re taking the view that cost of funds is going to increase tremendously next year,” he said.

Bouris has been maintaining for some time that an industry benchmark should be introduced to track the cost of banks’ wholesale funding.

Last week NAB Chief Executive Cameron Clyne backed Bouris’ proposal.

Bouris spoke to Lending Central about his concept.

LC: What benefits would be derived from publishing a benchmark funding rate for banks?
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The ACCC appears to have overestimated the strength of Australian mortgage competition when announcing last year that it would not oppose the Westpac / St George and Commonwealth Bank / Bankwest mergers.

The ACCC’s Public Competition Assessment in August 2008 calculated the merged Westpac / St George entity would at that point have had a mortgage market share of 21%. At the end of September 2009 the combined Westpac / St George entity has 23.4% mortgage market share, according to the forthcoming CoreData-brandmanagement Australian Mortgage Report.

In forming its view last year the ACCC noted a number of regional banks were expanding their presence in other states, citing Bankwest, Bank of Queensland, Suncorp and Bendigo Bank.
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Angry bank customers have found a new place to deposit their anger.

They are hitting the world wide web instead of their bank branch and are venting online about sloppy service and interest rate rises.

A new Nielsen Online study reveals social networking sites such as Twitter are booming with people publicly expressing their displeasure.

The study measured consumer-generated media, or “buzz”, around the big four banks and found online discussion spiked following specific incidents related to banks.
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Australia’s banks have protected their margins at the expense of business customers rather than home-buyers, during the global financial crisis, a report published by the central bank shows.

The report also found the major banks’ average net interest margin (NIM) - a main indicator of bank profitability - had risen recently, offsetting falls that occurred in the early stages of the crisis in mid-2007.

In the decade prior, the average NIM on the banks’ Australian operations had tended to decline by around 10 basis points (0.10 percentage points) a year, the Reserve Bank of Australia (RBA) report published on Thursday said.

This was partly due to tighter spreads on some loan products.
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By Jill Fraser for Lending Central

In a series in which Lending Central will speak to a number of leading aggregators, AFG General Manager Sales and Operations, Mark Hewitt kicks off the discussion with the comment that he sympathises with both sides.

Acknowledging that this has been one of the most exasperating periods ever for AFG members Hewitt says brokers are justifiably feeling that they’re in a no win situation with “demanding customers on one side and what appears to be overly bureaucratic banks on the other”.

However from another perspective he notes: “It’s hard to get angry at banks that are still lending money when we’re fortunate in Australia to have a lending system that stood up to the pressures of the financial crisis and banks that are still willing to lend via brokers”.

“Conspiracy theorists say that the big banks are deliberately trying to squeeze the broker channel in favour of their proprietary channels.
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Banks are blaming a flood of first-home buyers attracted by the increased government grant for long delays people faced in getting home loans approved.

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photo credit: faerybootsTight offshore credit markets combined with the two-tier cost of the government’s wholesale funding guarantee is seeing Australia’s banking landscape morph into a two-horse race.

Analysts and industry players say competition over funding and its impact on the mortgage market is eroding the clout of Suncorp Metway, Bendigo and Adelaide Bank and Bank of Queensland, leaving Commonwealth Bank of Australia (CBA) and Westpac Banking Corporation the clear front runners in the sector.

Wilson HTM’s banking analyst Brett Le Mesurier said regional banks not only had to pay more than the major banks to access the federal government’s wholesale funding guarantee, but were now charged an additional margin by professional investors.

“They are effectively paying in the wholesale markets for term funding a 100 basis points or more than the major banks, which is a tremendous disadvantage,” he told ABC Television on Sunday.
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The nation’s banks remain under fire for failing to pass on in full the cut in official interest rates handed down earlier this month.

The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points at its April board meeting, with three of the major banks passing on a mere 10 basis points of the move.

The National Australia Bank passed on nothing.

A survey by lobby group Essential Research found that 86 per cent of people believe banks should always pass on an official rate cuts in full.
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Fed up with the negative messages bombarding the broker sector Ian Lane, Senior Business Development Manager Nationalcorp Home Loans set about researching and assessing a broker’s true value.

The result, the first Australian study of its kind, is eye opening.

Late last year Nationalcorp Home Loans carried out a survey and discovered that brokers are buying into fear, which is leading them to choose to deal with banks over non-banks in order to satisfy their customers’ false notion of security.
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Banks and businesses could prolong the economic slowdown if they change from being dare-devil risk takers to timid investors, Reserve Bank of Australia (RBA) governor Glenn Stevens says.

Banks might stop taking risks because of the global financial meltdown, Mr Stevens said at a conference in Malaysia on Tuesday.

“The financial crisis may lead to a certain simplification of the financial sector for a time, with the closure of markets for many complex products, banks moving towards more narrow, traditional business models and the disappearance of some highly leveraged institutions with complex business structures,” he said.
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There is growing dissatisfaction with the cost of doing business with Australia’s commercial banks, a survey says.

The dissatisfaction is particularly acute after most banks declined to pass on in full interest rate cuts from the Reserve Bank of Australia (RBA).

The survey, from banking research and advisory company East & Partners, measured how businesses ranked their bank’s performance in nine different areas.
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Federal Treasurer Wayne Swan has issued a please explain to bank chiefs over their failure to pass on interest rate cuts to credit card customers.

Reserve Bank data shows Australians owe nearly $45 billion on their credit cards with some incurring interest charges of up to 20 per cent - nearly five times the official cash rate.

Mr Swan said he would be having discussions with bank chiefs shortly about passing on interest rate cuts to credit card users.
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Banks will be outlawed from conducting mortgage fire sales in Queensland in a move to protect struggling homeowners.

Premier Anna Bligh on Wednesday announced that laws would be fast-tracked through parliament this week to prevent financial institutions intentionally selling repossessed properties at below market value.

Ms Bligh said the practice saw banks accepting offers to cover their own costs, which left the home owner and their family with little or no equity to start again.
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Retail banks will be under immense pressure to slash mortgage rates with another large official reduction widely tipped for Tuesday.

The Reserve Bank of Australia (RBA) is expected to cut the cash rate by 75 basis points when its board meets on Tuesday, although economists say a full percentage point reduction would come as little surprise given signs that the economy is slowing rapidly.

Mortgage holders can expect to save a further $140 per month on an average $300,000 mortgage should the banks pass on in full the expected cut in official rates.
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