Financial Services Talking Points | 31/08/2016


In today’s talking points: Chief banking regulator warns on hybrid securities; Small business ombudsman gets ‘bank inquiry’; ASIC sets out rules for online-robo financial advice; China to draft an accountability system for SOE managers

Chief banking regulator warns on hybrid securities

The Australian Prudential Regulation Authority is warning investors against heavy investing into hybrid securities to chase better yields. “Viewing these capital investments as simply higher-yielding substitutes for vanilla fixed-interest investments, let alone deposits, is something to be counseled against, since from APRA’s perspective holders of these instruments are providing the important first lines of defence that we can call into action, in some instances even ahead of shareholders, to aid an orderly resolution,” the chairman of APRA,  Mr Byres said. Today there are around $30 billion worth of hybrids listed on the stock exchange. They count towards the banks ‘ tier one’ capital levels and are cheaper than the highest form of capital, common equity tier one. The corporate regulator has expressed concern about issuing such complex securities, which are difficult to value and are poorly understood among investors.

Source: The Australian

Small business ombudsman gets ‘bank inquiry’

The government has given Small Business Ombudsman Kate Carnell, “ royal commission powers” to examine banks interactions with small companies. Small Business Minister Michael McCormack, has asked Carnell to look into cases of small businesses “severely impacted by questionable banking practices.” Carnell will be making recommendations to government and possibly even to banks for possible legislative, regulatory or even cultural changes to address the problems faced by some small businesses and safeguard against banking misconduct. “We will conduct hearings and will use the powers set out in our legislation to require banks to appear and to provide us with the documentation that we need to thoroughly conduct this inquiry,” Ms Carnell said.

Source: The Australian

ASIC sets out rules for online-robo financial advice

The Australian Securities and Investments Commission (ASIC) has published guidelines for financial services providing automated advice using algorithms.

The guidelines clarify what is considered personal and general advice to help companies better understand when they are required to hold an Australian Financial Services (AFS) certificate. Companies offering factual information online will not need an AFS license because the advice is of a general nature and not tailored to individuals. Start-up fintech businesses providing digital advice however will be required to apply for an AFS license or become an authorized representative of an AFS license. ASIC deputy- chairman Peter Kell said on Tuesday, “ASIC supports the development of a healthy and robust digital advice market in Australia as a convenient, low-cost option for retail clients, and our guidance will help ensure that consumers can have confidence when they deal with digital advice providers.”

Source: The Australian

China to draft an accountability system for SOE managers

On Tuesday, China’s State Council announced plans to formulate a state-owned enterprise managers’ accountability system to punish illegal business operations. The regulations will be published by the end of 2017 and by 2020 will expand to include all government-funded institutions, not only state-owned enterprises. The accountability system aims to reduce state asset loss and encourage productivity. Under these regulations, managers could be fined for business operations such as project contracting, risk control, investment and mergers,

Source: China Daily