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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Westpac hit by $510m provision, and Hayne compo costs could rise

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Westpac hit by $510m provision, and Hayne compo costs could rise

Australian Financial Review Apr 30, 2019 6.22pm

James Eyers

 

Failings by financial advisers operating under Westpac Banking Corp's licence have triggered a $510 million pre-tax provision and the bank has flagged compensation bills could rise even higher.

Chief executive Brian Hartzer described the $357 million after-tax hit to the first-half profit as "disappointing" but said it was part of Westpac's efforts to mop up "outstanding issues" in the scandal-prone financial advice sector.

Before its first-half profit numbers were released on Monday, Westpac said advisers operating under its Magnitude and Securitor licences would trigger "potential repayments" to customers of $297 million. This is more than the $260 million by which first-half profit will fall due to the conduct of the bank's own salaried advisers, announced on March 25.

The customer repayments for misconduct by "authorised representatives" represent 31 per cent of the $966 million in ongoing advice service fees they collected over the decade to 2018. Ongoing compensation risks associated with advice influenced Westpac's decision to abandon providing personal financial advice, also announced in March.

The revelation of Westpac's rising remediation costs, announced after market on Tuesday,  comes ahead of ANZ Banking Group reporting half-year numbers on Wednesday morning, followed by National Australia Bank on Thursday. Rising costs from the Hayne royal commission-prompted clean-up are a significant headwind for big banks and have driven widespread investor pessimism about the sector, which is still reeling from the inquiry's revelations that customers had been charged billions of dollars in fees for services never provided.

Westpac said its ultimate compensation bill remained uncertain. Its approach could change "following industry and regulator discussions", the bank warned, and "this may alter the estimates used in determining this provision".

It also said it was continuing to work with current and previously authorised representatives and their customers "to determine where a payment should be provided".

"The final cost of remediation will not be known until all relevant information is available and payments have been made," the bank said.

The latest provisions also include pre-tax interest costs of $138 million and $75 million for running the program.

Total cost across the four major banks and AMP for remediation, royal commission expenses, additional risk and compliance costs and running the remediation programs is currently about $6 billion, Shaw and Partners analyst Brett Le Mesurier has estimated.

Westpac's provision comes two weeks after National Australia Bank said additional charges relating to customer remediation for wealth failings would trigger a fresh $325 million hit to its first-half profit.

Westpac's Mr Hartzer said in a statement on Tuesday: “While it is disappointing that we have needed to make these provisions, I said at the end of last year that our priority was to deal with any outstanding issues and process payments as quickly as possible."

Analysts expect Westpac to report next Monday a cash profit of about $3.4 billion, which would be down 30 per cent from the $4.2 billion reported in the previous corresponding half. The total cost of customer remediation programs will reduce Westpac's cash earnings in the first half by $617 million.

Even though banks are struggling to increase revenue, negative public and political sentiment about the sector will maintain pressure on them to pass on interest-rate cuts, should the Reserve Bank move following last week's weak inflation print.

 

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