It has been the thing that everyone in the property and finance industry has been talking about. It has been a while in the making and the 530 final report is finally out. I have had a week to read and review and in this special newsletter I will summarise the report and let you know how it may affect you so that you don’t have to read the 530 pages!
If you have read the report you will know that there has been very little recommendations to increase regulations on the banks. The market has definitely seen the lack of increased regulation as a good thing for the banks hence the huge jump in the banking share price. I think the lack of extra regulation will have a positive effect for investors. The banks will now start to increase market share by pushing money out to borrowers around June – July. Once this happens you will see the property prices in the capital cities outside of Sydney and Melbourne start to increase in value again. People are still earning money and need to invest. The money will once again flow into those undervalued markets.
If you would like to go straight to the summary, please do.
Why was the Royal Commission (RC) undertaken?
For years banks in Australia have been taking advantage of consumers and being able to get away with it. One of the worst hit sectors has been farmers. These guys have really copped a hard time in years past with banks really having the capacity to take people farms at will. But they are only one sector. The RC includes investigations on Superannuation funds, advisors and management and culture of the banks themselves. These guys in many cases have just blatantly broken the law. In fact during the RC there was 10,323 submissions (complaints) against Financial Services providers. The RCs intention was to find these people out and make recommendations on how to correct this and move forward in the right direction.
Key questions
There were 4 key questions that the RC used that “would form the pillars of any comprehensive policy response to what the Commission has publicly exposed”, which were accepted by Commissioner Hayne in the final report:
Underlying principles
The RC advises that 6 underlying principals need to be met:
Banking
Financial advice
Superannuation
Insurance
Culture, governance and remuneration
Regulators
Compensation
Summary
What surprises me and I think the overall industry in general is the lack of increased regulation put back onto the banks. In reality there has been no real changes at all. I think the idea that making consumers pay Mortgage Brokers for their services is crazy. This will only serve to increase profits for banks as consumers will refuse to pay brokers. This will therefore reduce competition and favour the big four banks with the branches. The market has definitely seen the lack of increased regulation as a good thing for the banks hence the huge jump in the banking share price.
I think the lack of extra regulation will have a positive effect for investors. The banks will now start to increase market share by pushing money out to borrowers around June – July. Once this happens you will see the property prices in the capital cities outside of Sydney and Melbourne start to increase in value again. People are still earning money and need to invest. The money will once again flow into those undervalued markets.