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NAB Payments System Crisis Resolved
Australian banking major National Australia Bank has resolved the technology issue which has plagued the lender for the last few days which left millions of customers cashless.
According to NAB, the remaining 19,155 customers that were still affected by the issue now have access to funds in their account, nearly six days after the problems first arose.
“This means that all customers are now able to transact as normal. NAB again wants to extend our sincerest apologies and thanks to our customers for their ongoing patience and understanding as we have worked to resolve these issues.” NAB said in a statement.
On Monday NAB said the vast majority of its customers had had their bank accounts restored, with just 19,155 customers still facing issues, which it said would be resolved over the course of the day.
Last Wednesday chaos ensued when a human error resulted in corrupt software code paralysing the lenders payment system leaving customers unable to access funds in their account until yesterday.
NAB says it will refund any fees levied on customers that were charged as a result of the issue. The lender asked customers who incurred charges from other institutions as a result of the error to contact the bank.
“A process will be put in place to identify and put right instances where NAB customers may have inadvertently incurred fees, interest or other charges from the bank as a direct result of these delays,” the statement said.
“Where customers have been charged a fee or have incurred a cost from another institution as a direct result of these delays, we encourage them to contact us so that we can work with them to also put things right.”
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NAB Technology Chaos Infecting Other Banks
Technology problems affecting NAB have begun to spread to the systems of other banks leaving millions of Australians short of cash and corrupt savings accounts which reflect phantom debt.
NAB’s problem began last week and over the weekend the systems of other Australian lenders started to become infected. Nearly a week after a “corrupted file” delayed payments, including wages and welfare benefits, the NAB error has now contaminated the entire banking system.
In response to leaving customers without cash, NAB opened 16 branches for unprecedented Sunday trading. The lender has issued an apology and promised that none of its customers would be financially disadvantaged.
CBA, Westpac, ANZ, HSBC and Citibank have all reported customer issues stemming from the NAB data processing error.
Internet statements of some customers bank accounts indicate that they have been levied with interest rate charges for phantom debt generated by NAB’s corrupt computer.
George Wright a spokesperson for NAB said the lender would not charge customers interest on debt which had been incorrectly portrayed in their accounts as a result of the error, adding that NAB intended to reimburse those customers who had been charged late payment fees from utility companies whose bills had not been settled on time through direct debit.
“These delays should be rectified soon, we will get everyone’s accounts up to date and people will not be left out of pocket. If customers are charged a fee by someone because of a delay in payment, they should contact us and we will put that right.” he said.
NAB opened 16 branches in New South Wales, Melbourne and Brisbane to deal with the crisis, which has resulted in ATM and EFTPOS transactions unreliable and leaving customers in the lurch as they wait for weekly pay and without cash.
The transaction problems will have a knock-on impact on retailers, just starting to cash in on the Christmas shopping crowds.
Mr Wright said that neither a computer virus nor sabotage were responsible for the problem. “It wasn’t a virus and it wasn’t sabotage,” he said. “It was a corrupt file that caused the system not to run in the normal way.”
NAB last night released a statement saying that some customers “may experience duplicate, or missing transactions” but that “customers do not need to do anything. NAB will rectify these duplicate or missing transactions.”
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NAB Says It Is Working To Fix Technology Problem
Australian banking major NAB is working to fix technology related issues which have resulted in the delay of customer payment and transaction processing which occurred overnight, and has stopped EFTPOS and ATM machines from working.
NAB says it is working to solve the problem and is optimistic that all delayed payments will be processed today.
NAB in a statement said that customers may experience delays with electronic banking facilities such as electronic fund transfer at point of sale (EFTPOS).
The problem resulted in a rise in the number of complaints made to NAB customer call centres which had further exacerbated the problem.
NAB spokeswoman Meaghan Telford said NAB staff were progressively processing payments that were due to be processed at 0400 AEDT on Thursday.
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Reform Proposals Threaten Major Australian Banks With $2 billion Earnings Hit
Proposed banking reforms may result in the major Australian lenders taking as much as a $2 billion a year hit.The Green party has proposed enacting legislation which would ban the practice of transaction fees and ATM charges, proposals which has received cross bench support across Parliament.
The Green party wants the government to force Australian lenders to offer fee free transaction accounts, and to limit interest rate changes to simply tracking the central bank’s rate decisions for the next couple of years.
Adam Bandt, a Green Party MP introduced the proposals, which rapidly gaining support amongst his parliamentary colleagues, including independents such as Tony Crook, Bob Katter, Rob Oakeshott, Tony Windsor and Andrew Wilkie.
The cross party support for the proposals suggests that group may end up backing coalition treasury spokes person’s Joe Hockey’s demand for an independent inquiry into the banking industry.
In return for its support, the group of MP’s are likely to demand that any inquiry established, also examine its proposals for banking reform.
Andrew Wilkie said that the dominance of the Big Four lenders in the banking industry needed to be broken.
“At the moment the big four banks are acting absolutely outrageously . . . and the public interest has been lost in this,” Mr Wilkie said.
The proposed banning of ATM charges, and restructuring of transaction account fees would be a significant hit to the earnings of the big four banking groups. According to estimates from the Reserve Bank of Australia, the major banks earned $1.63 billion from transaction fees last year, whilst ATM charges earned $400 million.
The proposals come after the major banks abolishing some fees during the last year, costing them nearly $1 billion.
For their part the banking groups have lobbied the Green party over the last month arguing against the proposed legislation.
The widening support is likely to add pressure on the government and in particular Federal Treasurer Wayne Swan who will reveal his proposals for banking reform in the following weeks.
Steven Munchenberg, chief executive of the Australian Bankers Association says that is the laws are passed, there is a risk that lenders may remove ATM’s from underused locations, which typically tend to be in rural and regional centres.
“I would be very concerned if the Greens’ proposals were achieved,” he said. “It could result in many ATMs in some areas becoming un-commercial, and there would be a danger that the banks would not expand their networks in some areas . . .
“If that was to happen, there would be the option for the other half of the industry (independent ATM networks) that would not be regulated under this legislation to provide their services at a much higher cost.”
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Australian Banking Chiefs To Face Senate Inquiry Next Month
Three of Australia’s top banking executives are set to face a Senate inquiry in December, as legislators seek answers to criticism that the banking industry lacks competition.
CBA chief Ralph Norris, along with Cameron Clyne his contemporary at NAB have both confirmed their intention to appear before the committee when it meets in December.
The two men will join Gail Kelly, chief executive of Westpac, the first banking chief to confirm her attendance at the hearing. The inquiry is seeking proposals to raise the level of competition within the banking industry.
Mike Smith, chief executive of ANZ has signalled he will not attend, because he believes there is no real need for another inquiry. ANZ says it will send Phil Chronican in Mr. Smith’s place, the lenders head of Australian operations.
The inquiry was established by Nick Xenophon an independent senator who said earlier in the month:”We expect to see the bank CEOs turn up that week.”
Parliamentarians are likely to examine the existing level of competition between non bank financials, and banks, current products on the market, and the evolution of the industry going forward.
Unsurprisingly chief executives of the big four lenders have all argued that sufficient completion exists within the industry, particularly within mortgage lending, when regional banks and non bank financials are taken into account.
Political pressure on the big four banks is likely to intensify next week, when Federal Treasurer Wayne Swan reveals his proposals for banking reform.
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Rate Hikes Forcing Australians To Scale Back On Christmas
According to the results of a new survey conducted by mortgage broker Loan Market, one in ten mortgage borrowers have scaled back their plans for the Christmas holidays as a result of higher interest rates.
The survey also suggests that nearly two thirds of people who responded to its poll said they were-evaluating their spending plans as a result of the impact of higher mortgage repayments.
An online survey by mortgage broker Loan Market also found that almost two-thirds of respondents were re-assessing their spending due to higher mortgage repayments.
Dean Rushton, chief operating officer of Loan Market said that the four 25 basis point rate rises by the Australian central bank during 2010 has had a major impact on the economy, particularly on the retail sector, which is in desperate need of a robust Christmas season.
“Many Australians are struggling with the cost of everyday goods as well as services such as power and water, and they needed some interest stability,” he said.
Of the 452 people who responded to the poll, 35 per cent said that banks and the RBA had “turned Santa into Scrooge”, whilst 17 per cent said they were opting for cheaper substitutes instead of more expensive food items over the holiday season.
38 per cent of poll respondents said that despite the increase in their mortgage repayments, it would be “Christmas as usual”
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Fund Manager Warns Government Against Excessive Regulation Of Australian Banking Industry
A leading Australian fund manager has warned the Federal government not to pursue a policy of heavy handed regulation of the banking industry against a backdrop of intensifying political debate, and opposition proposals for reform of the sector.
On Monday the opposition coalition introduced a private members bill into parliament which targets anti-competitive behaviour throughout the economy and in particular price signalling by chief executives of banks.
Yesterday Joe Hockey the coalition treasury spokesperson demanded a banking inquiry as part of his nine point plan designed to raise the level of competition within the banking sector, whilst at the same time denigrating Treasurer Wayne Swan’s plan for building societies and credit unions to transform into a fifth pillar that would have the ability to better compete against the big four lenders.
The Treasurer was “talking about taking a baseball bat to smaller banks like Suncorp Metway, such as Bendigo and Adelaide Bank, Members Equity and so on, because once the 800-pound gorilla known as the federal government gets into backing a single entity, then that is going to distort competition, not enhance competition”, Mr Hockey said.
Dion Hershan of Goldman Sachs Asset Management, speaking to The Australian said that international investors are now worrying about the level of political intervention in the banking industry, adding that Australian banking was already well regulated with strong prudential supervision, something which enabled the industry to survive the global financial crisis relatively unscathed.
“It was clear the political debate “doesn’t help” Australia’s reputation, It’s hard to measure how much it hurts, but it adds another layer of uncertainty. Investors don’t like uncertainty. Uncertainty is risk. Some of the commentary has been completely unhelpful.” Mr. Hershan said.
“Domestically is more of a wild card there, but it’s very hard to think of a major government initiative that could be in place for the sector that would be consistent with the way Australia is trying to operate and would not have serious unintended consequences. There has been a lot of politics and a lot of noise.”
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Australian Stock Brokers Merge To Better Compete With Global Investment Banks
As Australia’s stock brokers seek to compete more aggressively with global investment banks, two of the largest brokers plan to merge their operations.
On Friday, Bell Financial Group, which is listed on the Australian stock exchange announced its intention to merge its two wholly owned subsidiary’s Southern Cross Equities and Bell Potter in a deal which would created a full service independent stock broker which provides services for both institutional and retail clients, as well as offer investment banking and research.
Southern Cross would fold into Bell Potter under its name.
Bell Potter has approximately 300 private client advisers as well as a financial planning operation, and the deal would combine that capability with the corporate and institutional expertise of Southern Cross.
Integration of the two companies is expected to occur from July 1st 2011, and signals a further consolidation of the equity broking industry.
The deal would catapult the merged broker above smaller rivals Euroz, Wilson HTM and Hartleys to sit alongside Patersons.
Charlie Aitken a Southern Cross director, and who is widely expected to run the institutional business of the merged entity says the deal positions the new company to better compete against second tier global investment banks “who we believe are people you can compete against”.
Mr. Aitken says he believes that the new company will eventually acquire to ten broker status, a list currently dominated by global investment banks such as Deutsche Bank and UBS.
“We think that there’s three or four very good global investment banks in Australia and then below that there’s a competitive space that we intend to fill.”
Colin Bell, chairman of BFG and founder of Bell Potter says that a combination of the two companies would boost revenue synergies in “a one plus one equals three” situation.
Southern Cross executives are expected to run the merged group’s institutional, research, ECM and corporate divisions, with Bell Potter people to head the private client and other businesses.
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Westpac Chief Gail Kelly Outlines Bold Strategy For Future
Gail Kelly, chief executive of Australian banking major Westpac says that criticism which suggests that she does not possess a strategy for Australia’s second largest lender is unwarranted.
Mrs. Kelly contradicts the criticism by arguing that she is in fact in the midst of executing a long term transformation of the banking group.
Mrs. Kelly says the lender is shifting into a multi brand strategy which will leverage its St. George, Westpac, Bank SA and BT. Westpac intends to decentralize from head office into its branch network, whilst increasing the number of products available to its customers, a move which is underpinned by a $2 billion technology investment.
“We are all about sustainability, it’s not what analysts or others say in a quarter or a half. We are running a business for the long run and I think we have done that very well through the global financial crisis. We are definitely a much stronger business today than we were three years ago.” Mrs. Kelly said in an interview with The Australian.
Kelly says her strategy is to “focus on deep relationships with customers — earning all of our customers’ business, focusing on particular segments and doing it in a multi-brand way”.
Mrs. Kelly says she has lifted elements of her strategy from the operation of Wells Fargo, a US lender based in California that Mrs. Kelly greatly admires which also has the goal of satisfying a broad range of financial needs across a wide spectrum of customers.
“There are elements of their strategy that are very similar to our strategy. It’s about deep relations with customers throughout the cycle, about making sure we retain our customers and support them, building advocacy with our customers which leads to referrals.” Mrs. Kelly said.
Some banking analysts have criticized Mrs. Kelly for lacking strategic vision in boosting earnings, whilst Australian lenders face increased margin pressure from rising funding costs, slower lending, stronger domestic competition for deposits and intense political pressure to moderate interest rate rises.
Mrs. Kelly says that her current strategy for transforming Westpac is similar to the one she engaged in whilst running subsidiary St. George prior to being acquired by Westpac three years ago. Mrs Kelly says the strategy back then was to create a business that is “at its heart is our people and our customers”.
“We are engaged with a transformation of Westpac from a product-centric to a customer-centric organisation, from being head office-centric to distribution-centric,” she says.
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Experts Say Banning Exit Fees Will Result In Less Competition In The Banking Industry
According to The Australian Centre for Financial Studies, whilst the cessation of exit fees may result in a short term gain for customers who wish to shift lenders, the long term impact of the measure is likely to be less competition within the banking industry.
The Centre says the decision to place strict limits on bank’s abilities to charge exit fees will make it increasingly difficult for smaller regional lenders to compete.
Smaller financial institutions rely on keeping customers for years just to break even, having had to invest far more than the big four lenders to win those customers in the first place.
Deborah Ralston ACFS director says the exit fee measures are the latest in a series of regulations that have had a negative impact on smaller lenders, including the banning of ATM interchange fees, bank funding guarantees and the collapse of the securitization market.
“The major banks grew from strength to strength through the global financial crisis just as the position of their competitors, the second-tier banks, building societies, credit unions and mortgage companies weakened,” she said.
Professor Ralston pointed to the fact that whilst smaller lenders were required to pay the government 150 basis points for use of the Federal government funding guarantee, the major lenders were only charged 70 basis points.
Payment reforms implemented by the Reserve Bank of Australia, which require lenders to show their customers the cost of using their ATM cards at cash points of rival banks had encouraged customers to shift their accounts to bank’s with a larger ATM network.
Dr. Henry Ergas of Deloitte says that new entrants to the Australian market had introduced the concept of the exit fee, largely as a means of offering a better deal to potential customers by eliminating up front payments. Dr. Ergas went as far as suggesting that exit fees in fact increased competition within the banking industry by raising the value of acquiring a customer.
Exit fees also cuts the risk that a lender will lose its best customers and be left with the bad ones.
“At the outset, when a bank takes on a customer, there is some uncertainty about the customer’s future income trajectory and what the future value of the asset against which they are lending,” Dr Ergas said. “The lower the switching cost to good customers, the greater the risk that the bank will be stuck with the lemons.”
The result would be that everyone has to offer higher up-front fees to guard against this risk, he said. “Eliminating exit fees is a two-edged sword,” he said.