Increased regulation of banks to follow banking review _ afr. com market risk example

After two days of hearings at the parliamentary banking review, it is already apparent that the banking industry is in for a period of increased regulation.

Regulatory expansion has been a feature of the industry since the global financial crisis. Market risk in banks Unfortunately that has not worked in favour of increased competition.

In the global quest for a safer financial system the big have tended to get bigger and the smaller and mid-tier financial institutions have suffered.

In Australia, regional banks have struggled to compete with the big four banks despite being given a leg-up by the Australian Prudential Regulation Authority, which imposed a higher capital charge on mortgages written by the big four banks.

YBR said in its 2016 annual report that APRA’s pressure on lenders to limit growth in investment lending to no more than 10 per cent


led to an industry-wide tightening in credit. Global solutions group Also, many banks providing funds to YBR withdrew lending “due to verification issues on borrower incomes”.

YBR is a competitor to the big four banks with about $37 billion in mortgages written, or about 5 per cent of the home loan market. Managing the risks of organizational accidents Most of its loans are sourced from Macquarie Group. Market risk management in banks ppt But its most obvious growth opportunity is in wealth management, which involves providing incentives for mortgage brokers to refer customers to financial planners.

Much of the questioning on Wednesday of ANZ Banking Group chief executive Shayne Elliott and his deputy Graham Hodges related to the bank’s approach to cross-selling. Global solutions Elliott was under pressure to explain the process for referring customers from bank branches to financial planners.

Once again members of the committee from both sides of politics showed a lack of understanding of the financial services industry. Definition of stock market They nibbled around the edges of disclosure of incentives, but avoided the elephant in the room.

It was one thing to grill Elliott and Hodges on how referrals are made from a branch to a financial planner, and another thing altogether to drill down on the incentives driving the actions of the planners.

Financial planners in ANZ’s OnePath network are paid using one or more of the following methods: percentage of total funds invested, an initial or ongoing commission, an hourly rate or a flat fee.

The fact that up-front and trail commissions still exist says a lot about the lack of reform of financial planning despite almost a decade of inquiries.

The Future of Financial Advice reforms removed the payment of commissions by fund managers to platform providers, but it did not put a stop to commission flows in the system.

It is significant that on Wednesday, the owner of the country’s largest network of financial planners, AMP, launched a “contemporary financial advice business” called AMP Advice.

AMP’s plan is to ultimately move to a fee for service model in keeping with a prediction by AMP chief executive Craig Meller that all commissions would be gone at the company within five years.

AMP has 3796 advisers in Australia, but at this stage AMP Advice covers only 11 financial advice practices. Market risk reporting It will cover about 150 advisers by the end of the year.

The life insurance industry is grappling with this transition. Risk in stock market Legislation put forward by Financial Services Minister Kelly O’Dwyer will cut up-front commissions on life insurance from 120 per cent of the first year’s premium to 60 per cent.

Another area where commissions are under threat is in mortgage broking. Var market risk ASIC is conducting a review of broker remuneration that will likely result in a cut in either up-front commissions or trailing commissions.

Coleman has made it clear in his public comments that he thinks it is a good idea, and so has Prime Minister Malcolm Turnbull. Market risk in banks ppt Chanticleer suggested this as an area of focus for the committee last week.

Elliott says he is not opposed to it, although Commonwealth Bank of Australia’s chief risk officer David Cohen warned that it would be costly and complex.

Bank account number portability has been analysed in detail several times in Australia and overseas. Hotel risk management jobs It is due to be adopted in the United Kingdom in 2018.

Former Reserve Bank of Australia governor Bernie Fraser published a report in 2011. Market risk analyst jobs south africa He concluded the costs outweighed the benefits. Equity risk premium calculator A report published last year by the Centre for International Finance and Regulation noted that Fraser had not given reasons why a BSB number could not be merged with a unique customer account number rather than having to develop a completely new account number.

The other recommendation that is clearly on the cards is in relation to a tribunal to deal with complex and high value disputes with customers.

A recommendation in favour of a banking tribunal by Coleman and his fellow committee members would pre-empt a review of external dispute resolution led by Ian Ramsay from Melbourne University.

But the pre-emption game has already been played by Turnbull and federal Treasurer Scott Morrison. Managing market risk The tribunal is seen as another plank in building the case against a royal commission into banking.

The committee on Wednesday took a more aggressive stance than on its first day and that does not augur well for NAB chief executive Andrew Thorburn and Westpac CEO Brian Hartzer.

Thorburn will come before the committee with a new pristine approach to political donations. Market risk ppt It so happens NAB banned all political donations in May, but it only became public on Wednesday in the midst of Elliott’s appearance. What is the market risk premium When Elliott was confronted on the issue he said the ANZ board, led by chairman David Gonski, was reviewing political payments.

Hartzer has no fear on this topic as Westpac banned political donations in 2008. Risk of stock market It still pays to appear at political functions, which cost the bank about $150,000 last year.

Deputy chairman of the committee Matt Thistlethwaite seemed to take great pleasure in grilling Elliott on his bank’s relationship with Panjak and Radhika Oswal. Weather risk management jobs ANZ recently settled a court case against them at a cost of $200 million.

The only other revelation on Wednesday of note was the admission by Elliott that ANZ is reviewing its entire remuneration system. Market risk policy He admits it is far too complicated.