Banking and Financial Services
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Cash flow is king as technology changes the way SMEs will do their banking

Cash flow is king as technology changes the way SMEs will do their banking | Banking and Financial Services |

Small business owners, banks and fintechs can all gain valuable insights from a recent survey of SMEs conducted by research company Digital Financial Analytics (DFA).

The results reinforce the critical importance of cash flow management and identify a number of telling behavioural and demographic trends within this all important sector.

The DFA Small & Medium Business Survey 2015 of 26,000 businesses with turnover of less than $5 million reveals 57% of all business borrowing is for working capital.

Extended payments terms and late payments are the main reasons why managing cash flow has become one of the biggest challenges facing SMEs.

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Apps To Help You Save Money

Apps To Help You Save Money | Banking and Financial Services |

With recent research showing the majority of young Australians are not on track with their saving plans, investment start-up app Acorns has found a new way to help people save.

The company has developed an app that links to your debit card, rounds up your transactions and invests the ‘change’ in the market across five portfolios. For example, if you buy a coffee for $3.60, the app rounds this figure up to the nearest whole dollar and invests the 40c in stocks. It also helps simplify the stock market for young people.

Other apps that help people save:
1. Unsplurge - forces you to focus on saving with visual and community elements.
2. Toshl Finance app - creates a budget or spending plan customised for you.
3. Daily Budget - works by calculating a daily budget, based on your income and recurring expenses, such as rent, internet, phone etc.

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Macquarie taps investors with $400 million hybrid

Macquarie taps investors with $400 million hybrid | Banking and Financial Services |

Macquarie Group has kicked off an attractively priced $400 million hybrid issue, as the firm attempts to circumvent investor fatigue for bank raisings and concerns about volatility in the hybrid market.

Details of the hybrid issue were revealed by Street Talk on Thursday. The company outlined the specifics of the Macquarie Group Capital Notes 2 offer in a statement to the Australian Securities Exchange on Monday.

The hybrid issue marks the second time in two months that Macquarie has tapped investors and follows a frenetic period of equity raisings by the major banks in the past six months.

Macquarie said the capital notes will qualify as eligible regulatory capital with the Australian Prudential Regulation Authority, and the firm has the ability to raise more or less than the slated $400 million. The notes will be priced at a margin of 5.15 per cent to 5.35 per cent over the 180-day bank bill swap rate. They have a mandatory conversion date of March 18, 2024, and three earlier optional call dates at Macquarie's discretion.

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Governance change for the better

Governance change for the better | Banking and Financial Services |

The Financial Services Council’s Blake Briggs argues that there is little to fear and much to welcome from the super fund governance changes.

Reforms requiring independent directors on trustee boards have passed the House of Representatives. It is likely the Senate will vote on the reforms soon, one way or another bringing to a close one of the more divisive debates within in the superannuation industry.

The reforms are contentious but it is difficult to understand why this should be the case. The superannuation industry manages over $2 trillion on behalf of working Australians and has an obligation to embrace the highest standards of governance to protect consumers.

The Financial Services Council (FSC) has always viewed governance and competition reforms as a package that will prepare our superannuation system to deliver more Australians a higher standard of living in retirement.

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2015: A year of policy challenges

2015: A year of policy challenges | Banking and Financial Services |

If one thing distinguished 2015 as an important year for the Australian financial planning industry, it was the Life Insurance Framework (LIF) and the manner in which it will irrevocably change the business models of life/risk advisers.

In a year during which the findings of the Financial System Inquiry (FSI) were front and centre alongside the recommendations of the Parliamentary Joint Committee (PJC) and the Government's moves to change superannuation funds governance, it was only the LIF process which came fully to fruition.

As 2015 comes to a close, the recommendations of the Parliamentary Joint Committee (PJC) inquiry into education and professional standards remain to be fully implemented despite broad bi-partisan and industry support for their objectives.

Similarly, the recommendations emanating from the FSI remain a work in progress with some elements such as flat risk commissions overtaken by the LIF process while others must await the outcome of the Government's review of taxation arrangements.

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High bank returns support credit ratings, says CBA's Craig

High bank returns support credit ratings, says CBA's Craig | Banking and Financial Services |

The chief financial officer of Australia's largest bank says strong returns on equity are important to maintain the high credit ratings from international agencies that keep bank funding costs, and hence interest rates, relatively low.

Australian big bank returns on equity of around 15 per cent are higher than many banks in the United States and Europe. David Craig, CFO at Commonwealth Bank of Australia, said the safe, steady and consistent shareholder returns reported by Australia's big banks are important for the local economy because they underpin the AA- credit ratings granted by a ratings agency like Standard & Poor's.

"If we were lower rated, the cost [of borrowing] would be higher, and of course that cost would be passed on to the economy," Mr Craig said at a Bloomberg event in Sydney. "It is important for efficiency that we maintain our credit ratings, and part of the underpinning for those high credit ratings is reasonable and consistent ROEs."

The comments come after the prudential regulator said last month it was "open to debate" where the "right" ROE for a more resilient banking system might settle, and Treasurer Scott Morrison criticised banks for raising mortgage interest rates by more than the cost of additional capital demanded by the financial system inquiry.

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National Australia Bank says home loans demand 'kicked back again'

National Australia Bank says home loans demand 'kicked back again' | Banking and Financial Services |

National Australia Bank is confident about the prospects for corporate and mortgage lending despite the nation's slowing economy and recent signs that property prices may fall.

Home lending has "kicked back again" after the recent increase in mortgage rates, NAB's Chief Financial Officer Craig Drummond said in a telephone interview on Tuesday. At the same time, record-low interest rates and a falling currency have helped sectors of the economy such as tourism, education and health care, stimulating demand for business loans,

"We are very relaxed about the medium-term outlook for Australia," Mr Drummond said. "The Australian economy has solid growth rates underpinned by a competitive currency, access to strongish growth of the Asian region and very pristine credit quality."

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Japanese investors turn to Aussie managers, seek yield

Japanese investors turn to Aussie managers, seek yield | Banking and Financial Services |

Low interest rates and a recessionary conditions in Japan has pushed investors into the arms of Australian funds management firms, says a fund flows report released on Tuesday.

Funds mangers welcomed $11.9 billion worth of new funds from Japanese investors during the 2014 calendar year – mostly from other Japanese funds management businesses and private investors – said the Financial Services Council's 2015 Cross Border Flows Report.

Japanese money in managed investment trusts accounted for more than half of the combined amount of money garnered from every other country, said the report.

Next to Japan (56 per cent), New Zealand investors accounted for the next biggest chunk of foreign money in funds management products in Australia during the period (23 per cent), followed by South Korea (10 per cent) and the United States (9 per cent).

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Malcolm Turnbull kicks off free trade discussions with the EU: What a deal would mean for Aussie businesses

Malcolm Turnbull kicks off free trade discussions with the EU: What a deal would mean for Aussie businesses | Banking and Financial Services |

Members of the Australian business community has welcomed a move by the federal government to commence formal negotiations for a free trade agreement with the European Union, saying such a deal will help Australian business remain competitive on the global stage.

Prime Minister Malcolm Turnbull is currently in Turkey for the G20 summit and met with the EU leadership on Sunday to secure a timeline for the trade negotiations, reports The Guardian.

Formal negotiations will commence in 2017, with the EU leadership informing Turnbull it may take some time to complete groundwork with individual EU members.

“It is a very important step for us to have an FTA with Europe, This is the first substantive step and it is very important,”” Turnbull said, addressing Donald Tusk, the European council president, and Jean-Claude Juncker, president of the European commission.

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Australia must fight to become fintech hub of Asia

Australia must fight to become fintech hub of Asia | Banking and Financial Services |

Twenty-five million finance and legal workers around the world could find their roles being replaced by robots by 2020. That means computers will give you financial advice, do your credit checks, ensure against fraud and automate trading. 

The findings, revealed in a new Bank of America Merrill Lynch report, are startling, but not surprising - even the bank has recently announced it is developing a robo-advice product. The world is on the cusp of huge disruption and innovation, and the long-standing behemoths of the financial world are now being forced to take action.

London has become a poster child for the fintech revolution and its enviable position at the forefront of this innovation in financial services in Europe didn’t come about by coincidence.  It  also became global fintech hub though gumption and significant support from policy makers.  Following the financial crisis there was recognition that the City needed to do something to generate jobs and prevent itself from quickly becoming irrelevant. By providing the right level of policy and corporate support, London has been able to transform itself into a global fintech leader in just a few short years.

Now more than 44,000 people work in fintechs in London and the city lures venture capital and talent away from the U.S and other parts of Europe.

The time is right for Australia as a country, not just as Sydney or Melbourne, to seize the opportunity to become the regional leader of Asia.  While London leads fintech in Europe, and New York leads the US, there is not yet a clear fintech leader in Asia. History tells us that once a leading hub is established it will leave behind other cities in a very short period of time.

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CBA decision not to renew western Sydney office leases labelled 'stupid'

CBA decision not to renew western Sydney office leases labelled 'stupid' | Banking and Financial Services |

A decision by the Commonwealth Bank to move thousands of jobs from Sydney's west to the inner city has been criticised by advocacy groups.

The bank has announced it will not renew leases at its offices in Parramatta, Sydney Olympic Park and Lidcombe.

It will instead lease 93,000 square metres of office space at Australian Technology Park in Eveleigh, with plans to complete the move by 2020.

The Western Sydney Leadership Dialogue has labelled the move a "stupid decision" that will hurt the bank's business.

"They should realise the damage they'll do to their brand in the largest home lending market in Australia," chairman Christopher Brown said.  "The bank has effectively said to the region, we don't think you're necessarily part of our future, and I imagine part of western Sydney will re-consider their banking future at the same time."

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Victoria to attract financial services groups

Victoria to attract financial services groups | Banking and Financial Services |

TheVictorian State Government is set to release an action plan to boost the number of financial services companies in Melbourne.  

Victorian Minister for the Financial Services Industry Tim Holding says the action plan will promote the state as a “centre of excellence” for the sector.  “In the Asia Pacific region, Australia has the largest managed fund industry and we see opportunities to make Melbourne a base for exporting to that region.”

Vanguard Australiais one firm already using Melbourne as its base for expansion into Asia, given it offers products in Singapore and Japan from its Victorian base and is looking to expand into Taiwan, Hong Kong and Korea.

“Our progress in Asia is a marathon rather than a sprint. We are also looking at China and India, but it is a bit early for us to enter those markets,” Vanguard Australia chief executive Jeremy Duffield says.  The Minister and Duffield were speaking at a symposium in Melbourne last week to identify the products and financial services available in the state.

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Bendigo Bank sees no reason to raise funds

Bendigo Bank sees no reason to raise funds | Banking and Financial Services |

Bendigo and Adelaide Bank says it has no need to raise more capital, in contrast to recent moves by the big four banks.  Australia's fifth largest retail bank also says it is in better shape than it was a year ago.

Chief executive Mike Hirst says Bendigo and Adelaide Bank has a higher capital ratio than the major banks.  Even though the major banks now have to hold more capital against mortgages, they still hold less than 65 per cent of the capital required by standardised banks like Bendigo and Adelaide Bank, for those same assets.

"For us, that means a few things: Given everything we know today, there is no imperative for us to raise capital in the absence of a large acquisition or new changes to regulation," Mr Hirst told shareholders at the bank's annual general meeting on Wednesday.

He said there was no doubt that the Bendigo Bank is in a better position today than it was this time last year.

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What the banks want to learn from bitcoin

What the banks want to learn from bitcoin | Banking and Financial Services |

Bankers and economists are finding fresh virtues in the digital currency bitcoin at a time when the gold price is trading at close to six-year lows. So much so that the prominent American economist Bhagwan Chowdhry has nominated bitcoin inventor Satoshi Nakamoto for the 2016 Nobel Prize in economics.

Chowdhry, a professor of finance at UCLA, was asked by the Royal Swedish Academy of Sciences to nominate a candidate for the prize, and chose Nakamoto because bitcoin "is nothing short of revolutionary".

In his blog, Chowdhry argued that the "bitcoin protocol" (the information program that underlies bitcoin, which is also known as the blockchain) "has spawned exciting innovations in the FinTech space by showing how many financial contracts – not just currencies – can be digitised, securely verified and stored, and transferred instantaneously from one party to another".

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Tax white paper will target superannuation, not the GST

Tax white paper will target superannuation, not the GST | Banking and Financial Services |

When the GST was introduced in 2000, most low earners paid tax. But not now. In the past 15 years, the tax-free threshold has tripled to $18,000. And most self-funded retirees no longer pay tax. It's no longer possible to compensate them by cutting tax rates. And because many of them don't receive cash payments (that's why they are called "self-funded"), it's not possible to compensate them by boosting payments either.

Lifting the GST to 15 per cent or fully taxing food would be incredibly difficult if they wanted to compensate the least-well off, and Australians insist on it. New Zealand lifted its GST from 10 per cent to 12.5 per cent in 1989 without compensation, but it couldn't happen here.

And they'd be doing it for the states. Under existing laws, the GST flows to them. But the states aren't even agreed they want more GST. With NSW in favour, and Victoria against, and the money not flowing to the Commonwealth in any event, there's little reason for it to go out on a limb putting the case for collecting more.

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Banks eye mortgage growth with fixed-rate cuts

Banks eye mortgage growth with fixed-rate cuts | Banking and Financial Services |

As household budgets feel the pinch of higher mortgage rates, banks are stepping up their competition for new home loan customers by cutting key fixed interest rates, new figures show.

Comparison website RateCity says 11 lenders – including several big banks - have cut their three-year fixed interest rates in the last two weeks.

It comes after millions of big bank mortgage customers starting paying more interest on Friday, as variable interest rate hikes announced last month by the big banks and several smaller lenders took effect. Banks blamed the increases on higher regulatory costs, but are still competing aggressively for new borrowers or those who are refinancing.

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CBA, NAB, Westpac, ANZ back in favour

CBA, NAB, Westpac, ANZ back in favour | Banking and Financial Services |

Stocks in the big four banks have rallied hard over the past week - harder than the sharemarket in general - prompting analysts to suggest the sector has bottomed.

While the ASX200 has risen 5.1 per cent from its November low of 4997.9, Westpac is up 5.8 per cent from its November low, National Australia Bank 8.6 per cent, Commonwealth Bank 7.9 per cent and ANZ 10.6 per cent.   The rises come after a wretched year for investors in the big banks, who have suffered falls of as much as 25 per cent this year.

The reason for the bank rally was that the stocks were beginning to look irresistible after the falls, said Watermark Funds Management analyst Omkar Joshi.  

"There's been a lot of bad news that's been out there for a while - most of this year, in fact about capital and bad debt - and most of that has played out now," Mr Joshi said on Friday.

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Investment banks will continue to face revenue decline, says survey

Investment banks will continue to face revenue decline, says survey | Banking and Financial Services |

Revenue of the world's 10 largest investment banks will be down by 2 per cent in 2015 and touch US$148 billion (approx. AU$208 billion) compared to 2014. Only the equities division in those banks will be immune from the revenue fall, said a recent survey.

The third quarter results were weak for many investment banks, where revenue slipped an average 8 per cent, according to a survey by industry analytics firm Coalition. The survey tracked Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS.

Excessive regulations:  It noted the impact over regulation as reason for the slump in investment banking revenue, especially in Europe. The effects of tougher regulations, high litigation costs and market volatility have prompted most of the banks to restructure and shed staff and business segments, reports Reuters.

Most of the new regulations hit hard on the fixed income, currencies and commodities (FICC) division. That segment used to deliver half of the revenue to investment banks and is facing a revenue fall of seven percent at $64.8 billion (approx. AU$90.2 billion) in 2015 as compared to 2014, the Coalition's data showed. The data revealed that the decline was more than 50 per cent in many of the top 10 investment banks.

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Bank of Queensland won't be a big four 'mini me'

Bank of Queensland won't be a big four 'mini me' | Banking and Financial Services |

Bank of Queensland will focus more on priority industries such as health care, hospitality, and professional services, as it tries to lift profitability faster than its rivals.

Chief executive Jon Sutton on Wednesday told investors a key part of the bank's strategy was greater specialisation in business banking, as it tries to position itself as a "challenger" to the big four.

At the same time, it still aims to ramp up growth in mortgages through greater use of mortgage brokers and the launch of Virgin Money-branded home loans early next year.

Mr Sutton also joined the growing number of bankers emphasising ethics and trust as crucial, saying scandals around the world meant public trust in financial services firms was at its "lowest ebb ever".

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Will planners gain voice in advising Government?

Will planners gain voice in advising Government? | Banking and Financial Services |

The Federal Government has declared it will reconstitute the Financial Sector Advisory Council (FSAC) to give the financial services a voice in advising the Government on the performance of the financial services regulators — the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).

The Government's intention has been outlined by Assistant Treasurer, Kelly O'Dwyer, who said the reconstituted Advisory Council would include new members — something which would be vital given that it was fully functional in 2010 and many of its members such as former National Australia Bank chief executive, Cameron Clyne, have now left the industry.

The FSAC was first established by the Howard Government in 1998 and resulted from the Financial Systems Inquiry and O'Dwyer made clear to a Financial Services Council (FSC) event on Monday that the Government believed it was vital to ensuring the ASIC and APRA had appropriate capabilities and funding.

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Small Business Minister Kelly O'Dwyer announces easing of regulations on equity crowdfunding

Small Business Minister Kelly O'Dwyer announces easing of regulations on equity crowdfunding | Banking and Financial Services |

More than six months after the Murray Financial System Inquiry recommended changes to Australia's equity crowdfunding regulations, federal Small Business Minister Kelly O'Dwyer yesterday announced that the government is set to ease regulations and allow 'mum and dad' investors to invest in startups and small businesses.

In a speech delivered to the Financial Services Council, O’Dwyer said that the government would be looking to bring Australia into line with countries like Canada, the UK, the US, and New Zealand, where “small businesses and startups are able to use technology to reach new investors to finance or expand their businesses.”

Current Australian regulations limit the scope of equity crowdfunding to wholesale or sophisticated investors who earn at least $250,000 a year or have $2.5 million in assets. O’Dwyer announced that the new regulations would allow public companies with $5 million or less in annual turnover, or up to $5 million in assets, to raise $5 million a year from retail, or ‘mum and dad’ investors.

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Banks dominate Aust dividend payments

Banks dominate Aust dividend payments | Banking and Financial Services |

The big banks in Australia may be considered a good option if investors are seeking generous dividends, but exposure to just one sector could be risky.

The latest analysis of dividends from major companies around the world, conducted by global asset manager Henderson Global Investors, says Australia's banks generate over two fifths of the country's total dividends.

Consequently, Australian investors depend far more on dividends from banks than any comparable country.

Henderson said the banking sector again dominated dividend payments in the third quarter of calendar 2015, with ANZ, Westpac, and NAB all making large payments, each up in Australian dollar terms.  "The Australian banking industry is continuing to be very generous with its dividends, despite some of them raising large amounts of capital to bolster their balance sheets in response to Australian Prudential Regulation Authority concerns about risks in the mortgage market," the Henderson analysis said.

Head of global equity income Alex Crooke said heavy dependence on bank dividends left Australian investors with a large exposure to just one sector.

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Commonwealth Bank wants to boost green energy loans – and favours a carbon price

Commonwealth Bank wants to boost green energy loans – and favours a carbon price | Banking and Financial Services |

The Commonwealth Bank wants to ramp up its lending to renewable energy businesses, and has signalled it believes Australia should ultimately re-intstate a carbon price.

Group executive Kelly Bayer Rosmarin, who runs CBA's institutional bank, on Friday said CBA had "unlimited" appetite for lending to renewable energy, though she also highlighted the challenges banks faced in financing the sector.

As banks try to boost their green credentials, Ms Bayer Rosmarin also said CBA would support the introduction of a carbon emissions trading scheme in Australia in the "medium term," though she also acknowledged the "political realities" in what has been a contentious policy area.

Unlike some smaller lenders, CBA is not capping or restricting lending to carbon-intensive projects such as new coal mines. Nor is it setting a specific target for lending to renewable projects.

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‘Shadow banking’ on the rise, hits $US80 trillion

‘Shadow banking’ on the rise, hits $US80 trillion | Banking and Financial Services |

The value of unregulated “shadow banking” rose to some $US80 trillion last year, according to a report by the Financial Stability Board (FSB), which advises G20 states on banking reform and oversees regulation of the global financial system.

The report, issued ahead of the upcoming G20s summit in Antalya, said shadow banking transactions not subject to regulatory oversight grew by $US2 trillion across 2014 on a broad measure covering 26 jurisdictions and the euro area as a whole, representing some 80 per cent of global GDP and 90 per cent of global financial system assets.

The FSB, which advises G20 countries on banking reform and was set up six years ago after the implosion of Lehman Brothers, publishes annual reports into the parallel banking system under its remit to promote internationally transparent financial stability.

Shadow banking involves transactions outside traditional banking, including hedge and investment funds.

The Switzerland-based body, chaired by chairman Mark Carney, governor of the Bank of England, is also tasked with identifying potential weak points in the global financial system.

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Banks could be taxed like wagering companies

Banks could be taxed like wagering companies | Banking and Financial Services |

The banking industry has balked at the idea of a consumption tax on financial services after it emerged the government is considering measures that would tax mortgages like wagering.

Banks pay $1 billion a year in GST-related taxes and any additional cost would have to be passed on to customers in the form of more expensive loans, the Australian Bankers' Association argued.

As The Australian Financial Review revealed on Monday, the government is considering levying the GST on financial services.

Financial services would be taxed like gambling, where companies pay a 10 per cent tax on their margin. Betting companies work this out on a monthly basis by subtracting prize payouts from the total amount wagered. A government source confirmed this was being considered. 

Bankers' association chief economist Tony Pearson said financial services firms would pass on the extra costs to customers.  

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