Today’s banking summit drew leaders from government, financial institutions and regulators to discuss Australia’s financial landscape.
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The Australian Financial Review hosted its annual Banking and Wealth Summit today, which brings together a forum of banking and wealth leaders, regulators, and policymakers to debate the future of Australia’s financial services. Today’s summit was hosted digitally.
Here are some takeaway highlights.
Buy now, pay later industry ‘a potential threat’
Commonwealth Bank of Australia (ASX: CBA) chief executive Matt Comyn says that the buy now, pay later (BNPL) industry, especially its leading player Afterpay Ltd (ASX: APT), is a potential threat to the banking sector over time. The comment comes after data released on Monday showed that the BNPL sector had almost doubled in just two years. The data showed that transaction numbers using the BNPL platform had spiked by 90%, rising from 16.8 million in 2017-18 to 32 million today.
However, Mr Comyn insists that instalment payments made to a BNPL providers should be treated as credit – and that the whole sector should be subject to the same set of regulations imposed to other credit lenders, including the CBA.
“When you open a buy now, pay later account and it said you are approved for $1000, that sounds like credit to me … We believe that regulation is inevitable but not imminent,” he says.
Pandemic has permanently changed working arrangements
The coronavirus pandemic has permanently changed the way bank employees work, according to CBA and National Australia Bank Ltd (ASX: NAB). CBA’s Comyn says that the pandemic has accelerated workplace flexibility, but still expects customer-facing employees to return to the office in the near future.
NAB chief executive Ross McEwan echoes this sentiment and says that 80% of its staff have signalled they want a more flexible working arrangement going forward. Mr McEwan says, “They’ve proved they can do the job brilliantly from home… and I think we can find that balance so that it’s actually a win-win for everyone.”
NAB says economy is bouncing back fast, but warns on property market
NAB’s McEwan says that news of the vaccines have brought more certainty to the markets, and believes that Australia is on the road to recovery: “We’re now expecting the economy to get back to pre-COVID levels by late 2021, much earlier than we originally thought.”
However Mr McEwan was less optimistic about the state of the apartment market in city centres, saying that the outer suburb properties will outperform as people move further away from crowded areas.
During the summit, NAB has communicated via its Twitter account that all of its branches have been closed due to a physical security threat.
ASIC to be tougher on enforcement as it files criminal charges
Corporate regulator Australian Securities and Investment Commission (ASIC) says that it’s “getting on with it” after being given powers by parliament that will put the onus on industry to self regulate.
The comment came after Treasurer Josh Frydenberg told ASIC to steer away from policy making and focus on enforcement, saying “stop sending psychologists into boardrooms”. In response, ASIC says that it’s currently pursuing two dozen criminal charges on individuals and companies. Of the 13 royal commission referrals made to ASIC to pursue, just two remain under investigation.
APRA to change bank capital rules
The Australian Prudential and Regulations Authority (APRA) chairman Wayne Byres says that it will make some changes to the way capital is calculated, without changing the ultimate level of capital that banks need to hold. “Probably the most fundamental change from the proposals is that bank capital adequacy ratios will change, specifically they will tend to be higher,” Mr Byres says.
Treasurer Frydenberg slams regulators
Mr Frydenberg opened the summit this morning by reprimanding regulators for “over-zealous activity that has crippled lending”. The treasurer says the government wants to move away from ‘lender beware’ regulations to one where blame is not placed fully on banks when a loan goes sour. This, he says, will allow credit to flow to consumers more easily.
Mr Frydenberg says:
We want to cut red tape. But this is not about trying to help the banks – the banks are not my constituency. This is about helping consumers. I am seeking from regulators that they are not making policy, that they are not overreaching. I want to see them enforce the law, that would be better time spent than sending psychologists into the board room quite frankly.
The treasurer was optimistic, saying that Australian consumer confidence was up for the 11th straight week, the Australian dollar is back to where it was pre-COVID, and there has been no run on banks during the pandemic.
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Motley Fool contributor Eddy Sunarto owns shares of Commonwealth Bank of Australia. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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