A leading industry body has met with the Treasury to discuss banking transparency and lenders mortgage insurance, highlighting that delaying LMI disclosure “might play out negatively for the government”.
Peter White from the Finance Brokers Association of Australia (FBAA) has revealed that he met last week with Federal Treasurer Scott Morrison and a small group of business leaders to discuss the need for lenders mortgage insurance (LMI) disclosure to be included in the key fact sheet on all mortgage documents.
Although this suggestion has been previously agreed, it has not yet been adopted, and Mr White said he was concerned that the increased media interest in the subject might “play out negatively for the government if this is delayed”.
The FBAA chief has previously discussed the issue with Assistant Treasurer Kelly O'Dwyer, highlighting last year the potentially negative effects it has on borrowers who do not appreciate the full risk and obligations of LMI.
“This could be very embarrassing for government, with so many borrowers completely unaware of the hidden terms and conditions that affect their loan,” Mr White said at the time.
“We are hopeful of a positive outcome soon on this potentially nasty issue."
Bank ‘still not being open’
Although the discussion involved LMI, the FBAA has said that conversation at the meeting largely centered on banking transparency.
Mr White said: “I asked that given truth comes through transparency, how can we ensure greater transparency from banks to ensure borrowers are more educated, in order for them to make more informed decisions?
“Treasury is talking about better outcomes for credit card holders, and the current review is forcing the banks to acknowledge their failings, yet they are still not being open about issues like interest rate margins, credit card rates, and the bank bill swap rate.”
According to the FBAA, the Treasurer acknowledged that there was a need for a strong banking environment and profitable banking, but said that the government would not be telling the banks how to run their operations.
However, Mr Morrison did reportedly commit to holding the banks accountable for their actions and forcing them to explain their decisions and provide more details.
Bank bill swap rate rigging to be criminal offence
Indeed, since this meeting, the Treasurer has announced that the federal government is to make the manipulation of any financial benchmark, including the bank bill swap rate, a criminal offence.
Over the next 18 months, the government will reportedly work to implement “critical reforms” such as: making the manipulation of financial benchmarks (or products used to determine benchmarks) a specific criminal and civil offence; requiring administrators of significant benchmarks to hold a special licence, issued by ASIC; and giving ASIC power to develop enforceable rules for the administrators of significant benchmarks.
Speaking earlier this week, Mr Morrison said that the new rules would “better protect Australians from the possible abuse and manipulation of financial benchmarks by banks”.
“These measured changes will build on the steps that the Turnbull government is already taking to strengthen our banking and financial system, including strengthening ASIC’s resources and capabilities and the establishment of a regular parliamentary inquiry into Australia’s banking and financial system,” he said.
The FBAA said that while “something is being done”, it would “like to see more accountability”.
He added that the Association will continue its dialogue with key people within government in due course.
[Related: Bank bosses admit shortcomings]