Malcolm Turnbull is holding a press conference at 9.15am AEDT, 45 minutes before the share market opens, to announce some kind of response to the Financial System Inquiry, led by ex Commonwealth Bank boss David Murray.
The Australian reports the details were signed off last night by cabinet, but it’s not clear what will be announced.
We do know the prime minister will be joined by treasurer Scott Morrison and assistant treasurer Kelly O’Dwyer.
Depending on what Turnbull announces, today has the potential to be a watershed for the Australian financial industry because the Murray inquiry tackled some monster issues in the sector and proposed some sweeping reforms.
One of the areas of focus for Murray was superannuation reform. He believed the way the financial industry was structured around the $1.7 trillion in national savings was too costly for customers and that there was “little evidence” of performance-based fees.
The report also recommended abolishing borrowing against retirement funds, through self-managed super funds, especially for borrowing against in order to buy property. The rules allowing this have no doubt helped stoke the rampant housing growth in major cities over recent years, and Murray pointed to them as a risk to financial stability.
There were significant recommendations in the report, released by the Abbott government in December last year, was around increasing the capital ratios in the major banks. The prudential regulator, APRA, has been leading the charge on this spur of the report, trying to slow the rate of growth in lending to property investors, and banks have been responsive. The major banks have all embarked on significant capital raisings this year, with NAB and the Commonwealth Bank both securing over $5 billion and Westpac and ANZ both raising $3 billion. This clampdown, combined with slowing profit growth and a general slump in stocks has seen a major re-rating of bank stocks since April this year.
If Turnbull has more to say on this subject bank stocks could be in for an interesting day.
Financial advisors will also watch this morning’s announcement with bated breath, and not just because the cash-cow of superannuation could be in for some changes. In the wake of some of the advice scandals of recent years, Murray recommended the introduction of minimum education standards and new powers to punish financial advisors for selling people products they don’t need or understand.
There were other areas of interest: tackling culture in banking systems, establishing digital banking identities to protect against fraud and theft, giving more powers to corporate regulator ASIC, and supporting crowdfunding.
We’ll know more this morning and there’ll be full coverage on Business Insider as it emerges.