Tuesday 19th of February 2019

try harder to screw your banks, says scomo...

sick banksick bank

Australia’s banking system has become so concentrated its major banks can pass on costs and set prices to boost profits without fear of losing market share, through every stage of the economic cycle, the Productivity Commission has found.

The “four pillars” policy, which has underpinned Australia’s banking system since the 1990s, and which was designed to prevent mergers between the four biggest banks to maintain competition, has likely contributed to the problem, with evidence showing it is now preventing competition.

The reality of Australia’s “oligopolistic banking system” means the biggest banks are now regularly exploiting the inertia of existing customers, maintaining their market position with persistently opaque pricing, conflicted advice and remuneration arrangements, and a lack of easily accessible information that induces their customers to maintain loyalty to unsuitable products.


“Too often we have also become willing participants in a game where the deck is stacked against us,” he said on Friday. “Because you can almost guarantee it, the more passive a customer is, the worse deal they are going to get.

Real market power needs to be put back in the hands of the customer ... and we the customers have a role to play in this. Customers must stop being passengers and bystanders in their own cause.”

In a speech on Friday, Morrison said from July next year banks would have to start sharing more information on credit and debit cards, and deposit and transaction accounts, so customers could make better-informed choices.

“Open banking will be a game-changer,” he said. “Granting third-party access to your data securely will also make the process of switching between banks less painful and help overcome the ‘hassle factor’. More choice, more competition and importantly, more power.”

However, he has already rejected a key recommendation from the report that the Australian Competition and Consumer Commission (ACCC) become a formal “competition champion” that stress tests the competitive implications of proposed regulatory changes before they are implemented.


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Morrison has no clue about anything much... He believes in god...

spend wisely...


Last week the Australian Council of Superannuation Investors released its latest annual survey of CEO pay for the ASX200, reporting that CEO pay-packets increased significantly in 2017. 

Headlines focussed on the big earners of course, with Domino's Pizza chief Don Meij taking out the honours for the highest paid Australian CEO with realised remuneration of $36.8 million.

But closer reading of the ACSI survey reveals some interesting CEO remuneration trends. 

CEO fixed cash pay remained relatively static in 2017 with modest increases for ASX100 CEOs. This continues the low growth trend in CEO cash salaries previously reported.

CEO salaries have fallen ... wait, what?

In fact ACSI reports that fixed pay of CEO's in top-100 companies has fallen from its 2008 peak of 32 times average adult full-time earnings to just under 23 times in 2017.

The bonus and equity-based elements of CEO pay packets are what increased significantly last year. These are tied to achievement of specific benchmarks such as profitability and share price performance. 

To some extent CEO pay will increase because of growth in corporate profitability and this in turn is related to the low growth in Australian average wages.

However, this alone doesn't explain the spike in bonus payments last year, when most CEOs received a bonus and many bonuses were close to the maximum achievable. In 2017, 74 of the 80 ASX100 CEOs eligible for a bonus received one and almost 1 in 3 ASX100 CEOs received 80 per cent or more of their maximum bonus for the period. 

Indeed, ACSI remarked that ASX100 CEOs were more likely to lose their job than their bonus in 2017.

Are CEO bonuses and 'wage theft' connected?

It seems then that in 2017, ASX200 CEOs shared in Australia's economic growth. But is this spike in executive pay while wages growth is static actually "wages theft", with executives as the favoured few enjoying the benefits of improved company and share price performance?


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more brutality for the banks...

If rounds one to four of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry were brutal for the banks, there are plenty of reasons to think round five, which starts on Monday, will be even worse.

The reason? The commission will be examining superannuation.

"We estimate that the excess fees and charges and underperformance in super is about $12 billion a year," RMIT University Associate Professor Michael Rafferty told the ABC.

"In other words, the rip-off in wealth management is about three to four times the rip-off in banking." 

That's $12 billion a year being ripped out of people's retirement savings.

Australia's biggest superannuation provider, AMP, has already been hammered by the royal commission.

Its chairman, chief executive, three other directors, and its top lawyer are all gone.

Billions of dollars wiped off the value of the company, half a billion in costs stemming from the commission, a recommendation for criminal charges, and that's before the commission's even looked at superannuation.

"I think the AMP model has been exposed for what it was in that it was egregious in the way it was treating customers," Professor Rafferty said.


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