The Entirely Predictable Effects of The Banking Royal Commission

HighAndDry on 21/02/2019 - 23:56
Last edited 21/02/2019 - 23:59

From the ABC, this article titled Payday loans increase as households pushed into risky credit from non-bank lenders.

After increased scrutiny and accusations of irresponsible lending were levelled by the Hayne Royal Commission, banks have pulled back on new finance and tightened credit — something experts said was having the unintended consequences of pushing households into often riskier forms of credit offered by non-bank lenders.

Oh really. Actions can have unintended consequences?

What did people and politicians think were going to happen when you crater the value of most people's main asset and at the same time cut off the most common form of lending without addressing the reasons people were borrowing in the first place?

But the ABC being the ABC they waste the next third of the article on an anecdotal sob story about a woman who doesn't know the meaning of the word "budgeting".

And just re: 'payday loans' - you're never going to have short term unsecured loans to people who need them at low rates because by very definition those are the riskiest loans and you need high rates to offset that risk. You can't regulate out of that because you can't force people to lend out money as charities. The people needing these loans will either pay high interest, or starve.

Anyways, just another example of emotional outrage of the masses overruling a search for actual solutions. "Banks Bad!" Yeah yeah. Hope people like the alternative.

Thoughts?

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Royal Commissions, Australian Government

Comments

- HighAndDry on 22/02/2019 - 15:17
  
  -1
  
  Ha! Not too surprised though. It's not like there's zero correlation between "financial illiteracy" and "receiving Centrelink".
  
  Of course, if you tried to help and limit what people could do with their money, you'll be accused of being condescending and paternalistic:
  
  Laura Barnes from the Queensland Council of Social Services says the card puts vulnerable people at further risk and says they're against any further roll-out of it.
  
  And that only restricts using welfare money to pay to "buy alcohol, drugs or gamble".
  
  Edit: Oh and from your linked article:
  
  The Centrepay system was originally designed to help Centrelink customers budget
  
  No amount of technology can overcome human stupidity. That is a lesson we should've all learned by now.
  - kelza83 on 07/03/2019 - 21:00
    
    +1
    
    I’m hoping to very shortly enrol and study diploma in financial counselling. I think there’s a shortage of education. I think in Secondary school they should throw out some of the crap they read in English and replace it with The Barefoot Investor and have a commerce or accounting teacher lead the class and educate them in this rather than some of the other garbage that kids DON’T need to ever know and can never utilise once they leave school. Year 8 compulsory subject! It combines reading, writing and arithmetic because they can read it, write about it and learn how to save money with a few simple maths problems.
    - HighAndDry on 07/03/2019 - 21:23
      
      +1
      
      I'd be 100% behind this. So many people come out of High School - at an age where they're now legally adults - without any idea of how basic concepts in banking or budgeting or finances work. That's unsustainable in today's society, and has the potential to throw off so many otherwise intelligent and competent and great people off-course in life.
littleburrito on 22/02/2019 - 16:04

+9

According to legal documents, the Tates borrowed $570,000 for a Darwin property, and $619,000 to buy a property in Mudgee, and to finance the construction of a duplex on the land. They were also unaware the interest only period would eventually end.

And they are blaming their losses on Westpac for irresponsible lending???
- [Deactivated] on 22/02/2019 - 16:27
  
  +9
  
  Ridiculous
  
  And she's on TV balling her eyes out
  
  I hope westpac annihilate her
  - Pantagonist on 23/02/2019 - 12:00
    
    Balling her eyes out would be pretty gross to watch.
    
    I assume you mean "bawling"?
    - Other on 23/02/2019 - 16:59
      
      No shes balling.
      
      Keep 100% of the gain and socialising her losses - thats balling man!
- ihbh on 22/02/2019 - 21:15
  
  +12
  
  And the pathetic thing is if their properties had doubled in value, they'd be proclaiming what geniuses they are and might even be on the cover of a property investment magazine as investor of the year.
  - littleburrito on 23/02/2019 - 00:15
    
    +9
    
    There's been way too many articles regarding these geniuses over the past 5 years. I have always wondered what is the NET value of their investment portfolio as they are withdrawing equity to invest into the next property. A portfolio of $10mil @ 80% LVR can be pretty scary if the investment properties fail to secure tenants.
    
    And how did a couple in QLD get into investment property in Darwin and Mudgee? Did they attend one of those investment property seminars where they teach you how to be a millionaire cos it is that simple and everyone can do it?
  - Other on 23/02/2019 - 17:00
    
    +1
    
    @ihbh THIS SOOO MUCH.
  - cannedhams on 24/02/2019 - 20:07
    
    Exactly, I can't rec this comment enough:-
    
    https://www.macrobusiness.com.au/2016/02/2012-property-inves…
TightBungholio on 22/02/2019 - 21:27

+1

just got my 5 free copies today lol
abuch47 on 22/02/2019 - 23:03

-2

imagine thinking the ABC is the issue in this country. stop voting for this crooked mob.
monkeybusiness on 22/02/2019 - 23:56

+3

A line needs to be drawn somewhere and people need to take some personal responsibility too.

Yes the banks did some horrible things like fees for no service, charging dead people, etc and rightly should compensate the people affected for these. Management should also be held accountable for these breaches and should face disciplinary action/fines for allowing it to happen.

However, for lending it is completely different. The borrower is just if not more at fault then the lender as they are the ones that initate the request for a loan in the first place. Investment has risks. If you start making this the bank's fault then there is absolutely no downside risk for the borrower.

Circumstances also change when it comes to property valuations for banks. An acceptable loan in an area in 2008 is very different to one in 2019. e.g all those that bought in mining towns during the mining boom. Now the boom is over, the property are worth significantly less.

Nothing good will come out of these court cases. If the banks lose then the only people that will be hurt are those that the Royal Commission are meant to help. Credit will dry up to only those that can easily afford it. It will be even more difficult for first home buyers to get in. If banks refuse a significant amount of these customers, desperate borrowers will turn to alternative methods which charge higher interest rates. This is a lose/lose situation for everyone involved.
[Deactivated] on 23/02/2019 - 06:16

Yes irresponsible lending is the fault primarily of borrowers and it is ridiculous they are pursuing anything legally (and it would be no surprise at all if they have no success). However without getting emotive about this, as the Jones Hadley fuelled community of ozbargain considering their next AMG seem to be, the problem is unserviceable debt fuelling a housing bubble. Is it easier for the government to regulate potentially millions of individuals or a handful of banks? The problem here is a housing bubble, not the RC that may have triggered it's inevitable deflation.
Pantagonist on 23/02/2019 - 09:15

+1

This seems like a fairly inconsequential issue in the grand scheme of what the royal commission's findings and recommendations were.

Payday lenders have been around for years and they're certainly problematic in that they're a honeypot for people who are not good with their finances. In recent years there seem to be more of them around that have a greater presence through apps and remote lending, presumably because laws and regulations haven't really caught up with the digital age. I'm assuming that lenders like Afterpay, Zip Pay, Nimble etc. are operating within the boundaries of the law otherwise they would have been shut down a long time ago.

Your post seems to gloss over some of the substantial recommendations from the royal commission such as cracking down on fees for no service, shifting mortgage brokers away from long term commission-based incentives and further regulations for car dealers who sell pointless add-on products with their loans. All of these recommendations are designed to provide better outcomes for consumers by removing some of the labyrinthine ways that money lenders make their money which have zero benefits for the people paying for the services. You might say this is removing the ability for people to choose the services they want, but I would counter by saying that if a service offers no benefit, should it even be offered at all?

Naturally the response from the banks to the royal commission is predictable. They are all private entities with shareholders and their entire raison d'être is to make money. Of course, banks like the Commonwealth started out as government entities and over time have slowly become fully privatised (in 1996 in CBA's case). Under full or partial government control they have grown to a size that results in them being "too big to fail", and now under private stewardship they retain that status while still being guaranteed by the government to the tune of $250,000 per customer should they ever fail. Just another fantastic example of how privatisation serves no one but the owners and shareholders of that company.

I'm pretty sure the above is what outlander is referring to when saying that you need to see the forest instead of the individual trees.
- Other on 23/02/2019 - 17:30
  
  +1
  
  To think the RC did anything is laughable.
  
  They have completely entrenched the Banks even further into the system, which is a MASSIVE achievement in itself, mainly because no one could believe that the Banks could literally entrench themselves further into the system.
  
  So lets go through some of the achievements of the RC:
  
  ~ Closed down the only independent financial planner group in Australia not tied to Bank (which had actually whistleblowed)
  ~ Recommended changing broker commission on the advice on the Bank that would benefit the most (and who committed some of the worst sins) AND against the advice of the only major Bank that was not caught up in Scandal (1% of complaints are made against Mgt Brokers - so fantastic for focusing on them!).
  ~ Demanded they change HEM - which now has banks querying spending on kebabs
  ~ No change to business lending… even thought the commission interviewed victims of small biz predatory lending. #rainbows
  
  Saying that they did Criticises ASIC for being to close to the Banks, but that was offset by the fact that ASIC is now working IN the Banks offices! talk about capture! And did he talk about how ASIC staff are moving back and forth from the Banks? Any employment controls?
  
  Oh and the great thing about ASIC - they now are charging small biz/brokers/fin planners $1k-$2k in fees for 'Regulation' and they charge the banks $600k. So upto 4% of revenue for a small biz vs 0.0003% of 1Quarter of a banks PROFIT. That will teach the banks!
  
  I mean you literally can't make this s**t up.
  
  If you want to debate the RC recommendations in regards fin planning and broker commissions and how its GREAT for the Banks let me know.
  
  IF Aus GDP was going up I would of gone long the Big banks and shorted the small banks - thats how good it was for the Big banks!
  - Pantagonist on 23/02/2019 - 18:23
    
    +2
    
    ~ Closed down the only independent financial planner group in Australia not tied to Bank (which had actually whistleblowed)
    
    Which group was that? The RC didn't have powers to close down any businesses; just refer them to authorities. I'm guessing you're not talking about AMP because they're still operating, to my knowledge.
    
    ~ Recommended changing broker commission on the advice on the Bank that would benefit the most (and who committed some of the worst sins) AND against the advice of the only major Bank that was not caught up in Scandal (1% of complaints are made against Mgt Brokers - so fantastic for focusing on them!).
    
    Again, names would be helpful. The general consensus from the two major parties appears to be that trailing commissions be banned but some form of upfront commission structure should still exist. Doesn't sound like it goes far enough to me. I quite like Choice's recent suggestion but I'm not sure how it would be implemented.
    
    ~ Demanded they change HEM - which now has banks querying spending on kebabs
    
    Wouldn't this go some way towards dealing with what HighAndDry has been bitching about in this thread? More scrutiny being required of people's capacity to actually service debt can't be a bad thing. This hardly makes the banks' jobs easier, surely?
    
    RE: ASIC, I don't work in the sector so can't comment on the specifics of fees that they charge. The only reference I can find is to new prices they brought out in 2018 which was obviously well before the RC delivered its findings. I suppose they have to get their money somewhere if the government isn't interested in funding the agency properly.
    - Other on 24/02/2019 - 23:20
      
      +2
      
      Which group was that?
      
      Dover. Which was not tied to a financial institution. Oh & AMP is a bank (well they do loans - if it quacks…).
      
      Expect to see more of this stuff as Dover's court case continues against ASIC: "When Dover Financial flagged one of its advisers to ASIC for exploiting low-wealth clients, ASIC used the report as justification to have the licensee shut down"
      
      Please Note I am Not nor have ever been a financial planner and have never done a SoA, nor done any work in that part of the industry.
      
      Again, names would be helpful.
      
      You sell mortgages through 2 ways (well actually 3, but the 3rd way is like 12%, so lets ignore that for now): Branch network & Brokers.
      Who has the most branches and recently invested in new software (around $6Bn) to sell services/product to customers through their branches? CBA
      Who hates brokers the most? CBA (and yes they dislike brokers considerably - go look at what the former head of broker loans used to say).
      Who was the bank not really caught up in Scandal who wants to retain brokers? Macquarie (5th pillar).
      https://www.afr.com/business/banking-and-finance/banking-roy…
      
      Brokers are actually the only way for 2nd tier lenders (Mcq, Suncorp, AMP, BoQ, even Bankwest) to compete. If they didn't have brokers these business would die. Who benefits if they die? One guess - The Bank with the largest branch network?
      
      Broker Commissions
      
      Yes the sub sector of the industry which has the lowest level of complaints will be affected the most….
      
      First up why do Brokers get paid by the banks? Because the brokers are replacing a branch (which is a cost to the Bank).
      So explain why should consumers pay for the service, when it saving the banks money?
      
      Brokers trails disappearing! How great, except that its not - already ALP have just announced they are adding to the trail to the upfront payment….
      Expect the same from LNP.
      
      I would argue that Trail was important for 2 main reasons:
      1) Counter cyclical, meaning brokers would still get paid even if there was a recession, just like the Banks. This ensures that competition continues even during a downturn.
      2) Trail also focuses the mind of the Broker on ensuring s/he is compliant. Trails can make up 20%/30% of revenue (depending how long in Biz, etc).
      One of the greatest threats to a broker is an Aggregator removing them due to non-compliance and then withholding their trails.
      
      Its like deferred bonuses, just like in the AFR article I linked to. Deferred tends to create better outcomes (as stated by Mcq CEO), rather than the current bonus model of the Big4 Banks, which are upfront bonuses which drive a culture of greed (so brokers only care about how many loans, not compliance or long term customer focus - just like the Banks as identified by Hayne).
      
      HEM
      
      HEM was a big focus on the Royal Commission. It was a BIG focus because Hayne, being a judge, thought the Banks were not following their LEGISLATIVE requirements. So Hayne decided to fix that. But it basically ignores all the problems. Mainly because HEM is only part of the picture.
      
      The majority of people who get a Mortgage can afford their mortgage and are willing to reduce their spending to achieve that. For example they won't take that holiday, they won't spend on expensive meals out, etc.
      In fact I would go so far as to say that 90% of people who can't afford their mortgage did NOT get into that position due to the bank not figuring out their expenses correctly.
      
      You might question that. So for proof - go look at our default rate compared to the default rate internationally for the last 20 yrs. From memory its almost always lower than US, UK & EU. Australian's are willing to reduce their expenses quite considerably to keep paying their mortgage because home ownership is prized.
      
      So what actually makes people default? Almost always, Loss of employment/income. And ID'ing people's spending at a fixed point in time, will never stop people being fired, small business failing, etc and therefor will never stop the defaults.
      (because the loss of 50% revenue/income can never be made up with stress testing peoples expenses).
      
      So the RC's response is now to make everyone has to jump through new hoops, with an almost negligible change in default rate…
      So no real change…
      
      RE:ASIC
      
      I agree they need to get their funding from somewhere. But why should they take 4% of revenue off a small biz owner?
      
      I mean look at it this way: the banks conduct was so gross the Government ordered a Royal Commission. The RC cost TAXPAYERS around $65Million.
      So in response the Gov/ASIC charges 0.0003% of 1 Quarters Profit for regulating the Banks, after the taxpayer has just spend $65m to investigate them.
      They charge mortgage brokers, who makeup 1% of complaints, 2% worth of Revenue.
      
      The Banks will pay ASIC $600k each ($2.4M) for regulation, but how about this - we charge the Banks 0.001% of profit, and no one else has to pay? Small biz gets a break (they had the lowest complaints anyway); And please don't worry about the Banks, they collectively made $35.9Bn in Profit.
      
      My point in saying this is that their seems to be a focus on minimising any impact on the Banks (who make massive profits), and then socialising the costs on the rest of the industry. Its almost like we reward banks for their bad behaviour.
      
      Many will point to the fact the RC is going after the Banks financial planning was doing something!
      So what! is my reply - most banks sold their financial planning arm, after ensuring they will only sell the Banks financial products. So they make a bit less profit and avoid all the compliance issues! And could goto the RC and say we have taken action!
      
      CBA will sell their financial advice arm for $5Bn, ANZ $1Bn & NAB $3Bn - the pain, the pain…
      
      But the beautiful thing is that the Banks have all announced they are getting into robo-advice (Advice delivered by automation).
      So basically the RC gave them the excuse to reduce their headcount, allowing them to spend that money on robo-advice. I think one could argue that was a Net gain for the Banks.
      If you own CBA shares = good!. Thanks to CBA Branch network who will walk people through the robo-advice.
      Again vertical integration in the industry (which Hayne was against).
      
      So after the RC really what has changed? Short term - some stuff; Long term - Not much.
      
      Thats why I agree we probably will have another RC in 10 years:
      https://www.abc.net.au/news/2018-06-29/banking-royal-commiss…
      - Pantagonist on 26/02/2019 - 11:50
        
        @Other: All of your points seem to come back to the minutiae of internal dealings between banks, financial planners and brokers without addressing whether the outcomes of the RC are likely to benefit customers.
        
        I'd say that it's too early for anyone to make a call on that given how recently the findings were handed down, unless you want to draw a very long bow between the findings and what HighAndDry considers to be the natural extension from those findings (as if any bank would have given credit to someone on Centrelink to buy a $2000+ vacuum cleaner even when they weren't being scrutinised).
        
        As for Dover, weren't their own practices their undoing? I thought they had a habit of scooping up the scum from the bottom of the financial planning pond after other organisations had terminated them?
        
        The fact they might have been the only non bank aligned institution is irrelevant if they were the best the sector could offer.
        
        I'm also sure that there'll be another RC / investigation in the future. As is always the case with the banks and financial institutions, it's a constant game of whack-a-mole as they work out how to get around any legislative changes so they can go back to making money for nothing.
sprucemoose on 23/02/2019 - 09:57

+1

This RBC saga reminds me of the following quote:

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary.”

Hating banks is the current flavour of the week.
Therefore politicians need to capitalise on this hate by seeing themselves as the only people that can fix the problem.
They don't have time to think of the entirely predictable consequences of their actions/changes because it doesn't matter. As long as they can successfully convince the masses that they are the saviour (always thinking about that next election).
Then down the line when the changes in laws are a failure the cycle repeats itself. Politicians fixing problems they caused in the first place.
- Pantagonist on 23/02/2019 - 11:23
  
  +1
  
  A simplistic analysis if ever I saw one.
  
  Let's not forget the timeline of how the then-treasurer-now-prime-minister's opinions have been forced to change over time.
  
  Basically, the current mob in power objected to this royal commission right up until the point that they were dragged kicking and screaming into the fray by the stories from consumers coming out of the sector that could no longer be ignored.
  
  Then the revelations about AMP that came out in April 2018 put paid to any suggestion that some sort of higher investigation wasn't necessary.
  
  Basically, they'd already lost so much political capital by the time they approved the RC that no one is going to attribute it to their initiative come election time, unless the LNP plans to do an about face at the last minute and convince us that it was their idea all along and they saved us all from the banks' bastardry.
  
  How I'll laugh if that comes to pass.
  
  Now, let's all relive the wonderful chemistry between Commissioner Kenneth Hayne and Josh Frydenberg when the report was handed over.
  
  Also, LOL at your +1 from HighAndDry. I wonder if he's going to respond to any of the counterpoints being made, or if this is just another one of his "I hate everyone who I perceive to be poorer or stupider than me" diatribes in disguise as a serious conversation thread.
  - haemolysis on 23/02/2019 - 12:58
    
    The LNP already ARE pretending it was their idea all along. Point in case, Treasurer Josh Freydenberg on that Leigh Sales ABC report trying to pin the delay on Labor failing to do it in their term in power.
    
    The LNP taking credit is “a laugh”, yes. But don’t act like they won’t TRY it. They absolutely will and already have.
    
    I would also be strongly reluctant to say they acted because of a forced hand by virtue of consumer complaints. Please. They did have a forced hand, that’s for sure! But it’s being forced by the Labor government - who will very likely be in power next term. The LNP is acutely aware of that, and they want the commission done (if at all) on their own terms, with the concessions and compromises as negotiated with banking executives consent.
    
    That’s what they did. And now, they’re making the best of the situation by taking the credit.
    
    Meanwhile, it remains true that there wasn’t a big crisis to begin with, not much has changed, the commission found little of importance, and the stock prices are back to soaring again - and the government of the day look like heroes.
    - Pantagonist on 23/02/2019 - 13:27
      
      I would also be strongly reluctant to say they acted because of a forced hand by virtue of consumer complaints. Please. They did have a forced hand, that’s for sure! But it’s being forced by the Labor government - who will very likely be in power next term.
      
      Actually, it was more down to three Nationals MPs who threatened to cross the floor and vote for it which essentially forced the government's hand. Those three Nationals MPs were representing concerns by their constituents; ergo people power had something to do with it.
      
      If they'd lost a vote on the floor, it would have been a huge embarrassment for them. Of course, they've just recently been humiliated over the medical evacuations bill in a similar style. The writing's on the wall, in spite of Julie Bishop leaving because the LNP is in an election-winning position and she doesn't need to run again (LOL).
      
      Meanwhile, it remains true that there wasn’t a big crisis to begin with, not much has changed, the commission found little of importance, and the stock prices are back to soaring again - and the government of the day look like heroes.
      
      You're aware that the RC doesn't have the power to prosecute anyone, right? All it can do is refer people to the relevant authorities, which it's done. Things like this take time to flow through the system.
      
      By your own admission you say that the RC's terms of reference were determined by the LNP, so it's a bit humourous to then say that there wasn't a big crisis when the RC was partially compromised from the start.
      
      I'm not certain which circles you move in, but I haven't met anyone who says that the current government are heroes due to their handling of the RC.
      
      Again, let's not forget that the LNP decided that it was better to return to the days of sales masquerading as financial advice back in 2014 with their proposed winding back of FoFA laws brought in by Labour.
      
      Then in 2016 you had the ASIC chief publicly decrying the funding cuts to his agency by saying that they had reduced its capacity to conduct proactive investigations.
      
      No one in Australia takes the LNP seriously when it comes to financial regulation in the best interests of ordinary citizens. The only time their voice cuts through to the average Australian is when they're in opposition accusing Labour of spending too much money which people then relate to their own credit card spending and vote them back in thinking they're going to make everyone's lives better. Round and round we go.
      - Other on 24/02/2019 - 23:47
        
        @Pantagonist:
        
        A simplistic analysis if ever I saw one.
        
        And yet the correct analysis.
        
        Please remind me if the ALP, under FINANCIAL SERVICES AND SUPERANNUATION MINISTER BILL SHORTEN stated the would OPPOSE the greens introducing a Bill for a Royal Commission in 2016 and then Voted AGAINST the establishment of a RC
        
        ? ? ? ? ? ?
        
        Because I forget. And it seems @Nomadesque has also forgotten too….. (Date of announcement: June 2015, RC was called in 2017, 2yrs after….)
        
        Lets get it correct - Bill Shorten saw votes in an Royal Commission. And guess what - did his poll numbers rise?
        Is the pope a catholic? Do bears s**t in the woods?
        
        So, LNP was against RC, ALP was against RC, until they saw some votes in it.
        
        My dream is that @Nomadesque makes up some BS that Bill Shorten didn't know how bad it was and then I can post all the problems that were investigated by the RC, that * surprise * was done under Labor's watch.
        
        I guess my twitter saying is correct: "the system is corrupt, but idiots think changing the parties does something…"
        
        Pantagonist on 26/02/2019 - 11:36
        
        @Other: You seem to be confusing me for someone who thinks that voting Labor into office this year is going to solve all the problems in the banking and finance sectors.
        
        Not the case.
        
        Don't confuse the fact that I'm happy to lay into the LNP about their attitude towards the RC as a tacit endorsement of Labor.
        
        Oh, and at this point it seems clear that HighAndDry's motivations for posting this thread are pretty much as I suspected, given his lack of willingness to reply to anyone whose opinion differs from his own.
- Speckled Jim on 23/02/2019 - 14:20
  
  …politicians…
  
  …and the ever-present influence of their key conspirators/collaborators: the entertainment industry.
  
  Witness the countless hours of home improvement/DIY/property-flipping content. They're effectively working to drive up values, not only in the individual property they're working on, but all those "helpful tips" and dodgy practices so anyone with basic tools can also fool the market.
  Note too, all the real estate and hardware businesses advertising on the same network.
  Monkeys see, monkeys do.
  
  Pollies will never precipitate a downturn by using the R-word until it's upon us. Then it's typical crisis-management as moose illustrated.
- MessyG on 23/02/2019 - 17:31
  
  Rupert Murdoch once said "keep em scared keep em stupid". It works.
  - Other on 25/02/2019 - 00:28
    
    @MissG
    
    Are you sure? Isn't the saying: "Keep them scared. Keep them stupid, and they won't notice being ripped off"
    
    I don't think Murdoch was talking about how his newspapers charged the customer.
- Other on 25/02/2019 - 00:26
  
  @ Sprucemoose
  
  100% accurate - So true….
  
  How many inquiries have we had into the Banking sector? (from memory at least 25)
  How many have prevented future issues/problems? (Zero)
  
  Upvoted.
Repi on 23/02/2019 - 11:16

The Royal commission wasn't just about irresponsible lending and something is surely wrong when a Bank can't determine a loan amount from the last few Tax returns. There was also the little side show about trailing commissions, charging fees for no service, mortgage repossessions on Farms and so on. So far the Banks always got away by being really sorry, but something needs to change. Not much will change, to many wheels getting greased from our strong believe in competition (or collusion)
drprox on 23/02/2019 - 13:10

+3

What I find interesting (in line with a few comments here) is highly leveraged, low income individuals can't borrow anymore. Their loans will switch to P&I over the next few years as they won't be able to continue to refi IO. This will present opportunities for those who have kept their powder dry and/or have higher incomes. The truly wealthy (in a cash sense) will have some good opportunities over the next year or so!
- HighAndDry on 25/02/2019 - 11:19
  
  Exactly right - the biggest irony of all this is that over the next few years, as those who're poor and were barely above water will be pushed by the new changes into being fully unable to finance their property holdings, forcing them to sell to those who're richer and who don't need financing to buy property.
tonsta on 23/02/2019 - 13:45

Careful what you wish for people.
Toons on 23/02/2019 - 13:58

The day after some of the rulings I received in triplicate yes a complete waste of paper, involving anything to do with investing i.e. Super funds from a few different companies. surprisingly none of the banks

All wanting to make my future secure
Sandshoes on 23/02/2019 - 19:11

Firstly, on why no solutions are being seeked to resolve the elephant in the room, usury (Modern day interest), and taboo around 'money' and 'credit';
Essentially what we have is a communication problem with our social instituions (networks), of which a bank is only one of them.

“We will not read of that which hurts our pride or fears or 'feelings'. We forget, or gloss over, or excuse, an experience which injured the tentacles of our personality. We forget the pscyhiatrist's definition of a neurosis as 'refused pain'. In the same way we escape from mental pain. We refuse to believe what we do not like.”
- Christmas Humphreys (English Judge, and Author of Buddhist literature)

Most folk hold some notion (mistakenly) about how money is created, and, in this particular subject matter, 'loaned'.
Principly, a bank does not lend money, it is barred from doing so (read Pajet law of banking, and the several supreme court cases that are cited[authoritive text on law of banking]). Also if one takes a breath, slows down, and analysis the procedure of a mortgage, one will see, very clearly, that you, the so called 'borrower' has made a deposit in the form of a promissory note of which is accept as cash and placed on the balance sheet on the so-called 'lenders' books as asset.

None of this stuff is rocket science, and primarly relies on your unwiting belief in a method of accounting and 'book-money'.

Expose the usury crisis for what it is, a sham.
- Pantagonist on 23/02/2019 - 20:44
  
  Wait, you're surprised that a royal commission initiated by the LNP didn't require the commissioner to investigate the validity of the entire premise the monetary system is based upon?
  
  Baby steps, my friend.
  - Sandshoes on 23/02/2019 - 23:21
    
    +1
    
    Dear friend, i am , sadly, not surprised;
    
    The history of royal commissions, or any commission, demonstrates that by design they are created as a veil to give the illusion of something being done. Commissions are what may call a 'device' to undermine courts of law which seated a jury.
    
    i read a book several years ago when i was at Uni on the subject of 'commissions'. You can find a copy of the book "Government by Commissions Illegal and Pernicious: The Nature and Effects of …" is a good read and insightful. It was written by a Barrister-At-Law from Lincolns Inn who had a critical insight into the workings of varies social institutions.
  - Other on 24/02/2019 - 23:50
    
    +1
    
    lol… Well labor under financial services minister bill shorten vetoed a Royal Commission into Financial Services Industry.
    Do you think they really wanted a RC? Or was it for votes?
    
    The System will protect itself no matter what (whether its capitalism or socialism). They are no baby steps.
gimme on 23/02/2019 - 22:36

+2

Meh, I've never been ripped off by any bank. Why? Because I've done my homework. People make poor uninformed lazy choices then of course it's someone elses fault. And yea banks exist for our pleasure, they're not a business trying to make money…apparently.
- netjock on 23/02/2019 - 23:11
  
  +2
  
  Apparently it is the bank's job to spot intentional fraudulent information supplied by determined parties (borrowers). Got to pin the blame on somebody don't they.
- Sandshoes on 23/02/2019 - 23:27
  
  -1
  
  A bank is a good social institution when in step with right principles. However, becomes some-thing quite different, a monster if you will, when its purpose is corrupted.
- Other on 24/02/2019 - 23:51
  
  I've never been ripped off by any bank.
  
  Yes you have, you just don't know it.
  - gimme on 25/02/2019 - 00:22
    
    +2
    
    I know you think that was a smart comment but it really isn't as you don't know my personal circumstances.
    - Other on 25/02/2019 - 01:17
      
      Have you ever been charged an overdrawn fee? Please explain how the cost is close to the service? (a Federal court Judge stated it wasn't)
      
      Have you ever gotten a business loan? (why did rates Not follow the RBA rate downward).
      
      Has your mortgage ever gone Up in line with RBA changes, but fallen far slower?
      
      Do you have a premium credit card that has a very high interest rate, yet the level of default is very low on those cards?
      
      No not that smart.
      - gimme on 25/02/2019 - 07:34
        
        +2
        
        @Other: Nope
        Nope
        Nope
        Nope, I've never paid interest on any card. Got lots of introductory ff points though.
        
        Like I said, you don't know me.
imurgod on 24/02/2019 - 08:02

+2

Completely agree, OP.

A lot of the outcomes aren't in the interests of the consumer.
locknuts on 24/02/2019 - 10:04

+4

The recommendations will apparently wipe out the mortgage broker industry too. Mortgage brokers have been responsible for taking huge amounts of lending from the big 4 recently. Yet it was the big 4 who were largely responsible for the royal commission in the first place. I'm not sure this is a coincidence.
conservative on 24/02/2019 - 15:24

+2

Abolish negative gearing.

It's the only solution. Too many nurses and teacvhers thinking they can be millionaires with their shitty salary and kickbacks from the government for 'investing' in property.
- ihbh on 25/02/2019 - 08:10
  
  +1
  
  Abolish negative gearing
  
  For everything or just real estate for individuals?
  
  E.g. shares, businesses?
  - HighAndDry on 25/02/2019 - 11:16
    
    I'm pretty sure most people railing against negative gearing actually have no idea how it actually works or how it relates to the rest of the taxation system.
    - conservative on 25/02/2019 - 17:14
      
      Oh take a hike mate.
      
      I've done my fair share of reading. The people who talk like you are the ones who think the tax payer should subsidise your investments.
      - HighAndDry on 25/02/2019 - 17:15
        
        @conservative: Then you'd know that poorer investors like nurses and teachers aren't the demographics who predominantly take advantage of negative gearing, seeing as it requires both 1. a high enough marginal tax rate to be worth it, and 2. enough income to be able to wear the losses you make.
        
        conservative on 25/02/2019 - 17:19
        
        @HighAndDry: The wealthy can afford to lose on their investments.
        
        If both sides can agree on a cap on negative gearing, then I would be interested. No more than 1 investment property may be negatively geared.
        
        HighAndDry on 25/02/2019 - 17:20
        
        @conservative: Negative gearing is just the universal tax principle of deducting expenses from income before levying a tax.
        
        You add all your income before you're taxed. Why would you not add all relevant expenses?
        
        Also: Definitely not fitting username.
        
        conservative on 25/02/2019 - 17:24
        
        @HighAndDry:
        
        Also: Definitely not fitting username.
        
        Because I would like to see a significant drop in house prices. I outright own my homes (great grandparents, many generations in Aus etc.).
        I cannot buy the one I want (reasonably close to the city) for a family member at the moment.
        
        HighAndDry on 25/02/2019 - 17:26
        
        @conservative: A true conservative would pull themselves up by their own bootstraps!
        
        Or just accept that you've been priced out of the market and you don't have a right to own a property wherever you want.
        
        conservative on 25/02/2019 - 17:29
        
        @HighAndDry:
        
        Or just accept that you've been priced out of the market and you don't have a right to own a property wherever you want.
        
        I'm a young (not that young) mutt.
        
        HighAndDry on 25/02/2019 - 17:35
        
        @conservative: Ha. In any case, I don't think people realise what they're asking for (in classic: "be careful what you wish for" sense) when they want cheaper property prices.
        
        Property is seen as a safe investment for a reason. Property price drops don't happen in a vacuum - if property prices are falling, it's generally accompanied, if not preceded, by other issues in the economy and wider instability.
        
        Pantagonist on 26/02/2019 - 19:17
        
        @HighAndDry:
        
        Property price drops don't happen in a vacuum - if property prices are falling, it's generally accompanied, if not preceded, by other issues in the economy and wider instability.
        
        If you want a reasonably balanced summary of the whole housing bubble, just read the Wikipedia article on the subject.
        
        The RC was perhaps the trigger for prices tanking the way they currently are, but the conditions that have been created over many years through factors such as:
        
        state governments' restrictions on land supply, driving up the cost of land, lots, and thus homes.[2] Some have also blamed planning rules as acting to restrain supply of housing.
        
        and
        
        mortgage fraud aka subprime 'liar loans' and widespread irresponsible lending practices.
        
        also need to shoulder some of the blame.
        
        We all know the recent history of what happened in the US when the latter was allowed to go on unchecked, so perhaps the RC saved us from the worst of such excesses?
        
        If lots of people are able to take out loans for stupid amounts of money that they'll struggle to pay back with interest, that also fuels the artificial inflation of house prices because the market believes there's more prosperity and money out there than there actually is and prices rise in response to that perception.
        
        I believe that's what you free marketeers refer to as "supply and demand". The problem with that philosophy is that it's governed by the same irrationality that many humans are.
        
        HighAndDry on 26/02/2019 - 19:19
        
        @Pantagonist: Oh yeah I don't disagree with your points at all - the housing market was going to collapse sooner or later. But the government (and by extension the RC) is supposed to be there to serve as a stabilising and ameliorating force against the natural economic cycle, not exacerbate it. Though:
        
        mortgage fraud aka subprime 'liar loans' and widespread irresponsible lending practices.
        
        You realise the "liar" in "liar loans" refers to borrowers lying to borrow money right?
        
        Pantagonist on 26/02/2019 - 19:26
        
        +1
        
        @HighAndDry: Sure, but if the choice is between allowing things to go down the Fannie Mae / Freddie Mac / Lehmann Brothers route because that's the way the market flows vs. heading things off before the proverbial faeces really hits the fan, which would you prefer?
        
        2008 gave us a pretty strong insight into how interconnected the whole financial system is worldwide. Excesses in one country can easily cause the whole system to capsize, so it's not just about having no sympathy for idiots who borrow more than they can repay when your average citizen's wellbeing is also affected by the poor decisions made by the financial sector.
        
        That's why the RC was necessary, in my eyes.
        
        HighAndDry on 26/02/2019 - 20:42
        
        @Pantagonist: That's a false dichotomy. There's a lot of room to operate between: Letting a specific market overheat and blow up, and crashing an already cooling market and cratering it.
        
        Edit: Though if the contention is that the government is too incompetent to thread that needle and it inevitably had to go to one extreme or the other, I concede the point. This is better than the US subprime crisis.
        
        Pantagonist on 26/02/2019 - 22:13
        
        @HighAndDry: Outside of places like Perth and Darwin coming off boom times, were there any indications that prices in Sydney and Melbourne were generally cooling in December 2017 when the RC was announced? From memory it wasn't until towards the end of 2018 when people were starting to call the downturn more of a trend than a blip.
        
        I think it's hard to let a specific market tank without affecting other markets as I previously mentioned when talking about the interconnectedness of everything. We had a sub prime mortgage crisis in the US which then caused investors to freak and bail out of Iceland's banks because of perceived risk, then the next minute all of our savings in Australia are being guaranteed by the government and we're all getting $900 cheques to splash on consumer goods to keep things ticking over while the budget gets blown to kingdom come, then that budget deficit gets trucked out for the next 10 years as a reason why we can't have nice things and everyone has to suffer.
        
        Of course the ideal scenario is for the financial industry to police itself and do the right thing with respect to its customers. For whatever reason, the way the personal/moral values knobs are calibrated for people who work in high places in that industry don't match the expectations of the rest of us, so they need to be brought in line every now and then and reminded that they wouldn't have much money if people like us didn't give it to them.
        
        If anything, the debacle in 2008 was a demonstration of the fact that they just don't know when enough is enough and they'll drive full speed off a cliff in pursuit of profit rather than winding things back just a touch for the sake of stability and a sustainable financial sector.
        
        Oh, and in terms of "liar loans" I know that refers to customers. Liar loans and irresponsible lending practices go hand in hand and enable each other. It takes two to tango.
        
        HighAndDry on 26/02/2019 - 23:10
        
        @Pantagonist:
        
        were there any indications that prices in Sydney and Melbourne were generally cooling in December 2017
        
        Definitely. There were a lot of external (and govt-caused) factors leading to it, including (from memory), greater capital controls by the Chinese government, issues with mortgages (via brokers) already being discovered by the big 4 banks, increased restrictions and costs for foreign purchasers, and a glut of (impending at the time?) over-supply in the off-the-plan apartment market.
        
        If prices weren't already falling, the trajectory of property price rises was definitely slowing by then, and considering that crazily rising prices was, at the time, one of the bigger factors driving demand, falling price increases would've itself led to a self-reinforcing fall in demand and prices themselves.
        
        Of course the ideal scenario is for the financial industry to police itself and do the right thing with respect to its customers.
        
        This is the thing - at least with regards to the mortgage lending market, the issue wasn't banks being bad to consumers, it was banks being far too good to consumers - i.e. lending literally bucketloads of money to anyone and everyone. But this wasn't the main driver of the property bubble, rather it was the reverse, the fact there was a bubble was why banks were so willing to lend - so long as the bubble remained, there'd be very little of default because banks could always recoup their losses by selling the property.
        
        The property bubble was caused by a few things - the GFC and Australia's remarkably robust economy at the time relative to the rest of the world, the health of China's economy combined with Chinese cultural tendency to save leading to high demand for investment destinations, the exact same risk-averse-ness leading to prioritising investments in real property, and an already-rising Australian property market.
        
        That led to a huge wave of both domestic and foreign investment in Australian property which eventually turned into a runaway engine: higher demand meant higher prices meant higher demand, etc. This was a fairly structural issue which the government should have dampened in the beginning (but of course no one wanted to because everyone was still recovering from the GFC), and throughout the property bubble.
        
        Liar loans and irresponsible lending practices go hand in hand and enable each other. It takes two to tango.
        
        But only one is morally culpable. If I lie to a friend in order to borrow money from them which I can't repay, I've breached my responsibility to the lender. If I lend money to a crack addict, I've only been stupid but I haven't breached any responsibility (or rather, only to shareholders if I were a company).
        
        Banks and the financial sector aren't responsible for the financial health of the overall Australian economy - that's yet again the government's job. And again, one that they failed to discharge, instead diverting the blame to private companies which shouldn't, and aren't, responsible for anything but making profits for shareholders.
        
        Pantagonist on 26/02/2019 - 23:43
        
        @HighAndDry:
        
        it was banks being far too good to consumers.
        
        But, as we all know, altruism wasn't the motivating factor behind those excessive loans.
        
        But this wasn't the main driver of the property bubble, rather it was the reverse, the fact there was a bubble was why banks were so willing to lend
        
        As I've pointed out before, it's a symbiotic self-perpetuating relationship. A chicken-or-the-egg situation, if you will. Banks lend excessively, more money in the hands of consumers, property shortages due to artificial government influence, people ask for more money for their assets because there's more competition, banks lend even more excessively, cycle continues. I don't think it's possible to lay blame at the feet of any one factor.
        
        But only one is morally culpable.
        
        The way I see it, financial institutions employ people. People are morally culpable for the decisions they make; ergo moral culpability extends to those institutions.
        
        If the whole financial system was a perfect analytical beast that was purely rational in its pursuit of its one goal to make money, I'd probably give you a pass on that analysis.
        
        The fact that the whole system is based on fear and greed and runs on a plethora of other human dysfunctions in determining what it does day-to-day means that you can't completely disconnect the human element from it, which includes personal moral culpability.
        
        instead diverting the blame to private companies
        
        If these companies had just risen up out of the miasma of their own creation and grown to the size they have without government assistance and intervention then I could get behind that sentiment. The fact that every savings account in Australia is guaranteed to the tune of $250,000 by the Australian government (and hence the Australian taxpayer) means that blame can certainly be shifted and shared between them and the government regarding the financial health of the nation.
        
        Not too many banks out there that said "sorry, we're private companies so we want to stand on our own two feet and don't need your financial backing" when the GFC was in full swing. It cuts both ways. Now it's time for the financial institutions to give a bit more "quo" in exchange for the "quid" we gave them 10 years ago.
pizzapock3t on 24/02/2019 - 21:22

+2

Mate, while you can comment that the abc used an anecdotal story and then you dismiss the whole article is also being a alittle short sighted. I was pre approved for land purchase by 3 major lenders, but due to delays and land registration and the royal commission being conducted. I had steadily lost all 3 pre approvals during that time which forced me to go to 2nd tier lenders which do operate as repatius pay day lenders taking advantage of people’s situations with little to no regulation. My credit rating is outstanding and is the only reason it was viable. Thankfully I was able to leave and return to a 1st tier lender, and the bank did explain to me that unfortunately they have been applying a “one size fits all” to there servicing calculations. I can tell you first hand that while some people may be silly and over extend this simailar thing has happened to multiple people in my life in regards to there purchase.

I’m all for responsible lending, but you can’t go from one extreme to the other and actions do have un intended consequences and genuine people get hurt.
giventofly on 25/02/2019 - 10:59

+2

They need to teach budgeting and money management (and how people are affected by not doing so or by gambling) at school.

Can't leave it up to idiot parents to teach their kids.

It decays, and is, a massive burden on society.
PaperplaneXXX on 25/02/2019 - 11:31

well, In Brisbane apartment situation is interesting now.
According to some Real Estate agents the discounts from Developers are more significant now.

Maybe this year is a good year for buying in Brisbane
CyberMurning on 25/02/2019 - 14:15

+2

to fix this mentality, should start from early age and simple things.

for example, this is TOTALLY wrong in my eyes:
someone bought/borrowed money via cc/got into contract for an $1800 iphone, while she/he doesnt even have $5,000 in cash on their bank. my reasoning: 5k is small amount if you dont have that, you are not ready to spend $500 on a phone. full stop.
- PaperplaneXXX on 25/02/2019 - 15:28
  
  well said! I bought my last Iphone 6 4 years ago.Since then never buy them - company buys and then writes it off at 50 AUD every two years.
  
  but you are right 2000 dollar phones are ridiculous !
  Even more in countries like Russia when average monthly pay is 600 AUD but if you don't have an Iphone you would be judged by friends/people etc.
  Funny.
kelza83 on 07/03/2019 - 20:51

The annoying thing is, the ones reading are the entitled ones who are whinging while eating coffee and cake every morning after dropping their kids to school, not realising that this x5 probably equates to $60 a week, not to mention these ones are usually the ones utilising Afterpay, OpenPay and Zip pay simultaneously and wonder why they have hardly enough to cover themselves until the next paycheck comes in. I might not be the best to comment because I am currently on a disability pension due to an auto immune disease and am also a single mum yet to return to the workforce in any capacity, however I might add that I manage to save a couple hundred a fortnight when I pinch my pennies which I generally do because what’s the bloody point of going for hair makeovers every 6 weeks and high tea when you can’t even afford hot water to shower in?
- kelza83 on 07/03/2019 - 20:56
  
  Ps: prior to becoming ill I worked full time for the government and had a house and a car which I paid more than the minimum repayments on - because that’s what people need to do if they want to keep in front. I know it’s near impossible to buy a house without a mortgage these days, but the consumerism of people astounds me. 5 bedrooms these days is a must. You have this mentality in people in the latest 3 generations that says you have to get a mansion within the first 5 years of your career or you’re missing out. What’s wrong with forfeiting the first home buyers grant, buying something $100k less than what you can get by buying new, pay that off quick or at least get it to a healthy point where you can onsell and upgrade or rent it out gaining some collateral along the way? There’s ways to do things right and then there’s the way in which this royal commission came about.

The Entirely Predictable Effects of The Banking Royal Commission

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