Small businesses can expect better lending conditions as the economy strengthens, the Reserve Bank says.

In a submission to a Senate inquiry into access to finance for small and medium-sized businesses, the central bank says competitive pressures are again beginning to intensify in the banking sector.

"Foreign-owned banks are also likely to look to expand their presence in the market as global conditions continue to improve," it says in the submission released on Tuesday.

This will be welcome news to small businesses that have long argued that they are getting a raw deal from the banks since the onset of the global financial crisis (GFC).

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Australia is well placed to deal strongly with another global financial crisis, should one arise, federal Treasurer Wayne Swan says.

“We are very well placed to make judgments should those events occur, but those events are not in train as we speak,” he told Network Ten on Sunday.

“We know there is more unexpected weakness in the United States economy, but we would deal with those conditions should they arise in the same way in which we have dealt with them over the previous two years – very strongly and very effectively.”

When it comes to the Australian economy, investors are more worried about the unresolved impasse of a deadlocked parliament.
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By Jill Fraser for Lending Central

Whichever political party breaks the deadlock and forms government could do much more to enhance competition within the mortgage industry maintains RESI Mortgage Corporation’s recently appointed CEO, Lisa Montgomery.

“It’s not on the radar of either side because neither has a full understanding of the issues. Ironically some of the decisions made in the so-called spirit of competition have flown in the face of it.

“So the only way we can really move forward is to create our own competitive edge,” says Montgomery who believes that the non-bank sector will be struggling to claw back the market share it lost to the Big Four banks during the GFC.

“But we’re certainly doing whatever we can to encourage borrowers to put non-banks, building societies and credit unions on their shopping lists.”

Montgomery spoke to Lending Central about her plans for RESI, the MFAA and the gender divide in the industry.
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Global bond markets have priced in expectations that central banks are unlikely to raise interest rates any time soon, with their low level of yields reflecting depression-like conditions.

That view, by investment management firm PIMCO, comes at a time when the cash rates of the US, England and Japan have been below one per cent for more than a year.

PIMCO head of global product management David Fisher said the poor global outlook would stop most central banks from raising their rates. PIMCO manages $US1 trillion ($A1.14 trillion) worth of assets worldwide.

“The likelihood of central banks raising rates in this environment is slightly muted and this is why bonds, with their very, very low levels of yields … are pricing in not just recession, but depression-like conditions, he said.
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Borrowers are set to be spared a rate rise for at least another month with economists tipping the central bank to leave monetary policy unchanged next Tuesday.

All 16 economists surveyed by AAP forecast the Reserve Bank of Australia (RBA) will leave the overnight cash rate at 4.5 per cent for a second consecutive month following the board’s meeting on Tuesday, July 6.

Concerns about sovereign debt in Europe and weak economic data in the US recently have sent jitters through financial markets because the recovery in the world economy is looking slower than previously expected.

RBC Capital Markets senior economist Su-Lin Ong said the RBA would stay on hold next week.
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New research released today has found that Australia’s leading financial services names may be in for a shock when the recovery in markets does not lead to an equal recovery of trust in their brands.

This ‘trust trap’ could leave some firms floundering due to a lack of focus on the most important drivers of trust – such as honesty and communication – that have taken on renewed significance in the wake of the Global Financial Crisis.

The research, commissioned by financial services marketing firm endgame communications and carried out by industry research house Investment Trends, found:
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The global financial crisis (GFC) may not have blocked the flow of credit to consumers and businesses, but it has left banks scrambling for new ways to fund their loan books as credit demand picks up in 2010.

The big banks recently told investors in Hong Kong that although business credit in Australia was weak, overall credit demand would rise as domestic economic growth gathered pace.

While National Australia Bank’s chief executive Cameron Clyne questioned the current level of real housing demand, Westpac’s chief executive Gail Kelly said mortgage lending would continue to grow “at a reasonable level” in 2010.
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The global financial crisis (GFC) did not stop the flow of credit to consumers looking to buy houses, despite the rising cost of funding those loans and tighter lending standards, the Reserve Bank of Australia (RBA) says .

Although the GFC had a material effect on the pricing and structure of the Australian mortgage market, it did not have affect the quality of housing credit provided, RBA assistant governor (financial markets) Guy Debelle told a business audience in Sydney.

“Housing finance has been readily available throughout the crisis period, with housing credit growing at about eight per cent a year,” Dr Debelle said in a speech to the Mortgage Innovation Forum on Tuesday.

“The larger banks have filled the gap left by the decline of the wholesale lenders, so that there has not been a material constraint on the quantity of housing credit available in Australia throughout the crisis.”
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Half of $1m plus investors report GFC losses of up to 30%.

Australia’s wealthy have endured significant losses following the GFC with around half reporting a loss in assets of up to 30%, pushing nearly one quarter of investors out of the $1m + asset bracket.

The End of Certainty, an in-depth study of high net worth Australians’ investment and advice behaviour in a post GFC environment, released by financial research company CoreData, surveyed 1700 Australians with investment assets of more than $1 million.

The survey found Australia’s wealthy had polarised as a result of the GFC. Ambitious investors, those who recognised low share and asset prices as an opportunity to grow their portfolio have benefited significantly, while frozen or risk averse investors preferred the safety of cash-like assets.
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As the world’s banking sector emerges patchily from recession, the head of Australia’s central bank has identified the areas where reform must take place to guard against future global banking crises.

Much as a doctor prescribes medicine, Reserve Bank of Australia (RBA) governor Glenn Stevens, in a speech on Friday, defined a five-point agenda to guide regulators in reforming the world banking system.

While he did not spell out exactly what should be done`, Mr Stevens said reform should not shackle institutions and banking systems that already have shown themselves to be more stable and resilient than others, such as Australia’s.

Along the way, Mr Stevens said large international banks with trading operations would require more capital over time, to operate under a more stringent prudential regime.
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Australians may have been forced to take some tough decisions during the global financial crisis, but a new survey suggests they got off lightly compared to other Asia Pacific countries.

The research by global financial services group, Citi, found that 42 per cent of Australians said they had to make some tough changes to their finances in the past year.

In comparison, the survey of 11 Asia Pacific countries found a greater number of respondents in Thailand (68 per cent) were forced to make changes, followed by the Philippines (65 per cent) and Indonesia (64 per cent).

Australians also were much less likely to have downgraded or cancelled their mobile, TV or internet package, or postponed a holiday, or put off buying a big ticket item last year than the other 10 countries.
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By Jill Fraser for Lending Central

Fact: Fraud cases in Australia have doubled over the past six months.
Fact: The epidemic is set to increase.
Fact: Banks and other financial institutions account for one third of fraud cases prosecuted nationally.
Fact: Almost half of all Australian companies have been hit by at least one incident of fraud.
Fact: Four out of 10 Aussie businesses experienced at least one incident of fraud during downturn – close to double the global average.
Fact: 37 per cent of reported frauds cost more than $1 million – double the global average.
Fact: Organisations underestimate their future fraud risks.
Fact: Fraud prevention should be a central component of ongoing operational risk management.

Two powerful reports outlining the ballooning incidence of fraud were released this week revealing that corporate criminals have been taking full advantage of the economic downturn.

The most sobering fact is that those in the know say the increased number of frauds identified over the past 12-18 months is just the tip of the iceberg and that its occurrence is on the rise.
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By Jill Fraser for Lending Central

Wanted: Team players and self-starters who possess problem solving and networking attributes.

After emerging relatively unscathed from the mortgage fatigue that has beset the industry for the past couple of years Smartline is embarking on a period of expansion.

Referring to 2009 as the year when the industry suffered “death by a thousand cuts” Smartline Managing Director, Chris Acret told Lending Central that serious soul searching prior to the Global Financial Crisis helped Smartline survive.

He has no doubt that commission cuts will reshape the industry over the next few years and admits to being quite “underwhelmed” by the meekness of the proposed regulations.

Acret spoke to Lending Central about Smartline’s philosophy of nurturing franchisees and establishing a positive, non-competitive culture within the team whilst offering rare insight into his personal satisfaction and frustrations.
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A survey has found the Global Financial Crisis is a distant memory for most Australians, who now believe the housing market is set to take off – again.

“A surprising 73% of respondents expect house prices to rise, which is the highest proportion for more than three years,” said Phil Naylor, CEO, Mortgage and Finance Association of Australia (MFAA).

The MFAA/Bankwest Home Finance Index canvassed the opinion of 850 people on a range of issues relating to the economy and housing market.

“Confidence in the housing market is not only pre-GFC – it’s back where it was during the height of the housing boom,” Mr Naylor said.

“But there are still some clouds on the horizon, with recent interest rate increases negatively impacting households,” Mr Naylor said.
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By Jill Fraser for Lending Central

For the first time since the start of the Global Financial Crisis (GFC) small to medium businesses are starting to show signs of healthy improvement.

This week’s release of the NAB SME Quarterly Survey (September 2009) reveals that business conditions for SMEs (small to medium enterprises) have improved significantly, reaching positive territory for the first time since the GFC began in September 2008.

For the September quarter, large SMEs with an annual turnover between $5m – $10m recorded the strongest improvement and were the best performing at 6 index points, up from -13. Small
SMEs ($2 – $3M) recorded an improvement from -7 to 4 index points, with mid-sized SMEs ($3 – $5M) increasing from -6 to 3 index points.

The main driver of sales this quarter has been a sharp improvement in customer confidence/demand, and it represents the first positive outcome since September 2008. Positive impacts from seasonal and competitive factors have also helped.
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