Australian Securities and Investment Commission (ASIC) chairman Greg Medcraft said improving the culture and conduct of the biggest banks is one of his ”unfinished businesses” as he prepares to step down in November.
“I think the big banks are extremely powerful in this country,” Medcraft said at a Reuters Newsmaker event in Sydney. “When I became chairman I decided we need to build a war chest to take on big cases... I am not scared of anybody.”
One of the emerging problems in the sector is loan fraud in the mortgage market, Medcraft said.
A UBS survey released this week found factually accurate mortgage applications fell to just 67% in 2017, from 72 in 2016. There are now approximately A$500 billion in what UBS calls ”Liar Loans” on Australian banks’ books.
Medcraft did not comment on the accuracy of that report but said loan fraud was ”quite a major problem” in Australia.
Australian regulators have been pushing banks to tighten mortgage lending standards on worries a debt-fuelled bubble and bust in the country’s red-hot property market could destabilise the financial system and hurt the broader economy.
Medcraft also censured the banks on mortgage loan pricing.
Banks have jacked up home loan rates for existing customers while offering discounts to entice new borrowers, even though the official cash rate has been steady at a record low 1.50% since August 2016.
“Basically it really just feeds on inertia and I think that is, frankly, wrong, and I do think it feeds in to that lack of trust,” Medcraft said.
A CULTURE PROBLEM
Australia’s highly profitable banks have been rocked by a slew of scandals recently with the latest and potentially the worst being allegations of money laundering against the Commonwealth Bank of Australia.
When asked how long ASIC’s investigation into CBA might take, Medcraft said, ”depends on the level of co-operation.
"We’ve not had a great experience with banks. It’s a culture problem.”
A 2014 Senate Inquiry stated that ASIC is perceived to be “timid” and ”hesitant”. It is also seen as weaker compared to Western regulators in terms of the small fines it levies and other penalties it imposes.
ASIC is now trying to rebuild confidence, in part by taking three of Australia’s biggest banks - ANZ Banking Group, Westpac Banking Corp and National Australia Bank - to court after failing to reach a settlement over allegations of benchmark interest rate rigging.
Local media has speculated that Medcraft will be heading to Paris when he finishes up at ASIC in November, likely as a special adviser to the OECD secretary general.
The former investment banker lived in Paris for three years in the late 1980s when he worked for Societe Generale.
“I will be moving on somewhere else,” Medcraft said, without elaborating. - Reuters