Tighter Rules and Focused Scrutiny
20 April 2016
http://www.tradebustersconnect.com.au/australian-banking-sector-in-trouble/
In 2008, Australian banks barely made it out of the financial crisis. However, even with the said survival, recent reports suggest that they are no longer the pillars of success that most people see.
Australian banks are now in the line of fire as commodity rout makes it more challenging for the economy and a series of misconduct accusations threaten to destabilise the system.
What could this mean for you and property investors in general?
In the past several weeks, banks were called to court over suspicions of benchmark interest rates rigging. According to Business Insider, Westpac Banking Corp and ANZ Banking Group, both lenders, were summoned to court for the alleged wrongdoing.
The two institutions denied participating in any illegal doing and promised to defend their conduct furiously.
So how will this affect investors even simple home buyers?
Although the tighter rules and more focused scrutiny are intended to promote greater compliance, still, banks are at risk of medium-term financial penalties.
This can affect shareholder returns and earnings. There are already higher loan losses and stricter capital rules in place that added regulations may be imposed.
Investors and buyers may find it more difficult to apply for loans and other things should things continue to go haywire. Funding can also be challenging in the long run.
There were already a multitude of insurance scams and wealth mismanagement claims around that public pressure on examining bank conduct can eventually become more tedious for everyone.
Eventually, the reputation of banks could be at risk. It may be difficult to find the right lenders and insurance providers.
“Credit quality is by far the biggest risk that faces the banks. It can affect earnings, dividends,” said Andrew Martin, portfolio manager at Alphinity Investment Management, which holds stakes in the major banks.
“The second one is regulations, and the reason is, ultimately over time, the more regulation there is the more it will pressure returns.”
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