&nbsp;

A local Australian has spent a Lower North Shore record $15.1 million at <a href="https://www.apartments.com.au/new-apartments/elevate-hume-place-crows-nest-25-hume-street-crows-nest-nsw-2065">Elevate Hume Place</a>, the new TOD above the recently opened Crows Nest Metro Station.

The buyer amalgamated a penthouse and sub-penthouse to create the triplex apartment that will have five bedrooms, five bathrooms, a private rooftop pool, expansive terrace, and panoramic views of Sydney Harbour and skyline. The building is being created by burgeoning developer Third.i, alongside joint venture partner Phoenix Property Investors.

The buyer was drawn to Elevate’s unrivalled connectivity, situated directly above the&nbsp;<a href="https://www.apartments.com.au/developments/crows-nest-nsw-2065">Crows Nest</a> Metro Station, and the vibrant lifestyle precinct that surrounds it. The Metro connects to the CBD in just seven minutes, and Chatswood in four.

[smartcode_project:default project_id=142550 project_image_fid=309367]

Designed by internationally acclaimed architects <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, Elevate draws inspiration from the ancient blue gum forests native to the area. The building is a Net Zero development, created in consultation with Indigenous communities and exceeding sustainability benchmarks. Interiors feature chevron-engineered timber flooring, natural stone benchtops, and premium Sub-Zero Wolf appliances, delivering timeless elegance and next-level comfort.

The exchange of the $15.1 million apartment, follows a recent $5 million sale, and over $30 million currently in expressions of interests. Interest in Elevate’s penthouse stock has surged, reflecting a strong appetite for ultra-luxury residences that combine design excellence with unmatched connectivity.

[smartcode_project:default project_id=142550 project_image_fid=309369]

“We’re seeing a significant uptick in interest from local and international buyers who are prioritising connectivity, sustainability, and lifestyle,” said Callum Billinghurst, Head of Sales at Third.i Group.&nbsp;

“These recent sales are a testament to the vision behind Elevate. It’s not just about luxury finishes or panoramic views, it’s about creating homes that are deeply connected to the city and the community. Buyers are responding to that. They want to live somewhere that offers more than just a postcode, they want culture, convenience, and long-term value. Elevate delivers all of that, and more.”

[smartcode_project:default project_id=142550 project_image_fid=297878]

As part of the Hume Place precinct, Elevate is transforming Crows Nest into Sydney’s most dynamic urban village. Elevate’s unique position directly above the metro, combined with its curated amenity offering, has made it a magnet for buyers seeking a future-proof investment and a vibrant urban lifestyle.

The next release at Elevate is expected later this year.

[smartcode_project_cta:default project_id=142550]

“We’re seeing a significant uptick in interest from local and international buyers who are prioritising connectivity, sustainability, and lifestyle,” said Callum Billinghurst, Head of Sales at Third.i Group


Joel Robinson

Third.i & PPI set Lower North Shore apartment record with $15.1m sale at Elevate Hume Place penthouse amalgamation

Sydney developer Deicorp is set to officially open its <a href="https://www.apartments.com.au/new-apartments/hills-showground-village-castle-hill-2-mandala-parade-castle-hill-nsw-2154">Showground Village</a> precinct in Castle Hill.

NSW Premier Chris Minns will attend the opening on Sunday August 31, alongside&nbsp;Minister for Planning and Public Spaces Paul Scully, The Hills Shire Council Mayor Dr Michelle Byrne, Landcom CEO Alex Wendler, and Deicorp Founder Fouad Deiri.

Located just moments from Hills Showground Metro Station, the centre spans 9,500 sqm across four levels and features 26 specialty retailers as well as a 1,400 sqm public plaza, creating a new community meeting point for shopping, dining, fitness, and everyday convenience.&nbsp;

Showground Village forms part of the Hills Showground Station Precinct, an urban renewal initiative led by Landcom and Sydney Metro that will provide for around 2,300 new jobs over the next 20 years and around 9,000 new homes.&nbsp;

Deicorp was recently approved for another new development next door to Showground Village.

The new five residential buildings in the East Showgrounds Precinct, will see another 873 dwellings delivered, as well as&nbsp;3,500 sqm of open public space in the form of landscaped courtyards, a public park and communal outdoor recreational space including a playground, barbeque area, and outdoor seating.

“This approval will allow us to start construction on a range of beautifully designed, conveniently located apartments and create another vibrant, walkable and well-connected community,” said&nbsp;<a href="https://www.apartments.com.au/developers/deicorp" target="">Deicorp</a>&nbsp;Founder Fouad Deiri.

“These new homes will provide their residents with a seamless connection to jobs and services along Metro North West, and the new&nbsp;<a href="https://www.apartments.com.au/new-apartments/hills-showground-village-castle-hill-2-mandala-parade-castle-hill" target="">Hills Showground Village</a>&nbsp;retail precinct currently under construction."

Deicorp has several thousand apartments in planning and under construction across Sydney, from Zetland and Five Dock to Crows Nest and Macquarie Park.

[smartcode_project_cta:default project_id=133881]

Deicorp, NSW Premier officially open Showground Village, new retail and hospitality hub in Castle Hill

ASX-listed developer Cedar Woods is progressing its plans for its Southbank arts precinct site.&nbsp;

The developer has filed plans, which are now with the&nbsp;Department of Transport and Planning, for a new 20-level tower at&nbsp;<a href="https://www.apartments.com.au/new-apartments/141-151-sturt-street-southbank-vic-3006">141–151 Sturt Street</a>, a 2,718 sqm block opposite the Habitat Filter sculpture.

The proposal seeks to demolish the two-level&nbsp;commercial building, including a small supermarket and medical tenancies, and create a new building with 180 apartments and a focus on an&nbsp;active public realm and arts integration.

&nbsp;

<img alt="Southbank site" data-entity-type="file" data-entity-uuid="76a72db6-91ef-43ae-827d-a9cfa72893d2" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Site.png?VersionId=DZgtB4K6BswVh0QtCs3iLjXaLp0CbcEb" />

&nbsp;

There will be a full mix of apartment configurations, including 28 studio apartments, 16 one-bedroom, 104 two-bedroom, and 32 three-bedroom units.

Retail, creative arts, and residential amenity functions are integrated across the lower levels. A food and drink tenancy is planned to front Dodds Street, while a retail tenancy fronting Sturt Street will be accessed via an elevated walkway. The first floor includes a substantial 734 sqm creative arts space, envisioned to support Melbourne’s growing cultural and digital industries.

Architecture firm <a href="https://www.apartments.com.au/architects/rothelowman">Rothelowman</a> has put together the plans. In their&nbsp;Urban Design Report they highlighted the project’s ambition to embed itself within Southbank’s evolving cultural fabric.

A central feature of the design is a through-block link connecting Sturt and Dodds Streets, landscaped with native plantings and embedded with universal access ramps.

“The ramp has been thoughtfully integrated as the primary access point, ensuring universal accessibility for all users,” the report noted, with the link offering “a direct response to the urban planning scheme of creating more green spaces within our communities”.

<img alt="Southbank podium" data-entity-type="file" data-entity-uuid="4d24b1b2-d69c-4a11-a11d-ec6df432221c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium.png?VersionId=geWoJyZDmPSLODZ_.PNJ0LvpOmyyCdpo" />

The building’s podium form responds to the mandatory height limits along Dodds Street and maintains a fine-grain interface to adjoining developments. Above the podium, the tower is articulated with recessed balconies and a focus on views toward the CBD and surrounding arts institutions. A communal rooftop recreation deck and indoor lounge are positioned on level four, adjoining seven apartments and providing over 900 sqm of resident amenity space.

Vehicle access and loading will be provided via Dodds Street, with 155 resident car spaces located across two basement levels and the first three above-ground floors. Bicycle storage is more generous, with 226 spaces distributed across resident, staff and visitor needs.

Rothelowman describes the architecture as “humanist,” with ground-level interfaces designed to encourage social interaction and provide a dignified entry for both residents and passers-by. “All street interfaces are crafted to invite and nurture human connections,” the design report states. “The façade transitions to a human scale, providing an approachable and engaging streetscape”.

Cedar Woods, while well-known for its large communities it develops outside of Australia's capital cities, they have recently developed in Melbourne's inner-ring before. They are approaching completion at <a href="https://www.apartments.com.au/new-townhouses/88-leveson-north-melbourne-88-leveson-street-north-melbourne-vic-3051">88 Leveson</a>, just 15 townhouses in the heart of North Melbourne.

Cedar Woods progresses with new apartment plans in Southbank arts precinct

Brisbane developers Core Property Partners and Vector Property Australia has teamed up for Brisbane's newest apartment development.

The duo identified <a href="https://www.apartments.com.au/developments/east-brisbane-qld-4169">East Brisbane</a> as their preferred suburb, on the fringe of the Gabba Precinct, where they've just revealed BANKSII, 72 apartments opposite Raymond Park.

[smartcode_project:default project_id=136432 project_image_fid=5481]

The one-, two-, and three-bedroom apartments will sit in a glass-wrapped building that will also feature a rooftop with an&nbsp;infinity-edge pool, a BBQ area and alfresco dining spaces, sun lounges, and a sauna, as well as a resident-only gym and a ground-floor cafe.

Rhett Williams, Director of Vector Property Australia, said the project will lift the quality of the East Brisbane community and set a new benchmark.

"In Brisbane’s current property landscape, <a href="https://www.apartments.com.au/new-apartments/banksii-east-brisbane-169-wellington-road-east-brisbane-qld-4169">BANKSII</a> stands out through its emphasis on lifestyle-oriented living, connectivity and sophisticated design," Williams says.

[smartcode_project:default project_id=136432 project_image_fid=5479]

The 10-level building has been designed by MAS Architecture. Their designs were inspired by the native Banksia flower, with the architecture and interiors reflecting the organic symmetry of its namesake flora. MAS has interpreted this throughout the building’s curved form, façade detailing and interior palette.&nbsp;

The building’s flowing geometry and natural tones are complemented by large balconies and floor-to-ceiling glazing, maximising cross-breezes, daylight and views over the city, parklands and river.

“Having a strong narrative for a building helps us architecturally,” MAS noted. "We can choose colours that come off that species of flowers. The trunk and the trees and the flower elements all are now visible in our joinery on the inside and in our architectural finishes on the outside."

[smartcode_project:default project_id=136432 project_image_fid=5485]

Apartments will feature timber floors, soft porcelain tiles, brushed bronze fittings, and stone benchtops with warm veining.&nbsp;

Kitchens feature premium SMEG appliances and generous storage, while bathrooms have been designed as calming retreats with curved cabinetry and twin sinks in the master ensuites.

The building will feature a suite of rooftop and wellness amenities. Residents will have access to an infinity-edge pool, BBQ and alfresco dining areas, sun lounges and a rooftop sauna.&nbsp;

A residents-only gym will be located on the podium level, while a ground-floor café and landscaped laneway will further activate the site and improve neighbourhood connectivity.

[smartcode_project:default project_id=136432 project_image_fid=5488]

BANKSII will rise from a prime Wellington Road site, with the building oriented to overlook the adjacent Raymond Park and take in extensive city views. It is also on the doorstep of key&nbsp;lifestyle infrastructure, including the future Kangaroo Point Green Bridge, The Gabba stadium, and the planned Brisbane Live arena.&nbsp;

Public transport options, including ferry, bus and rail - including the future Cross River Rail Woolloongabba station - are all nearby, supporting a car-optional lifestyle just minutes from the CBD.

Williams said the team spent over a year searching for the ideal site before securing this location.

"We were attracted to <a href="https://www.apartments.com.au/developments/east-brisbane-qld-4169">East Brisbane</a> as it is a vibrant and growing community that offers a perfect balance of urban convenience and natural beauty with the parklands and river on our doorstep.”

The project is part of the broader Woolloongabba Games precinct, which is undergoing significant investment in the lead-up to the 2032 Brisbane Olympics. This urban renewal, coupled with infrastructure upgrades, is expected to enhance long-term liveability and capital growth in the area.

Given the wide max of configurations, BANKSII is expected to suit everyone from first home buyers and investors to families and downsizers.

[smartcode_project_cta:default project_id=136432]

BANKSII sales launch in booming East Brisbane apartment market

The Minns Labor Government will deliver Sydney’s first new heavy rail station in more than a decade – enabling up to 10,000 new homes by rezoning land around Woollahra and Edgecliff stations, right next to the CBD, to tackle the housing crisis and rebalance growth across the city.

Recent reports by the NSW Productivity Commission have warned that Sydney is losing twice as many young people as it is gaining, while also finding that Woollahra is the most feasible Local Government Area (LGA) in New South Wales to build new housing.

Despite this, housing approvals in Woollahra consistently lag well behind other LGAs, and the population has declined by 11 per cent over the past 50 years while Greater Sydney as a whole has grown by 74 per cent.

The new station that will be an eight-minute trip from Sydney CBD, will be located on the Eastern Suburbs train line in Woollahra, where a station build was started in the 1970s but never completed.

To enable the delivery of new homes the NSW Government will lead a rezoning of Woollahra and Edgecliff stations similar to other state led rezonings to allow additional homes to be built around the stations.

Affordable housing will also make up a proportion of development on the site with the final amount of affordable housing required, to be determined as part of the rezoning process.

The area surrounding the new station is within walking distance of major green and recreational space including Cooper, Trumper, Rushcutters Bay and Centennial Parks.

The Eastern Suburbs train line between Bondi Junction and Sydney CBD also has the lowest passenger usage rates during the AM peak of any line on the Sydney network, with only 43 per cent of operating capacity during the AM peak currently being utilised by passengers.

Sydney Water and Infrastructure NSW have confirmed there is capacity in the water and wastewater systems to accommodate the proposed 10,000 dwellings without major upgrades.

The rezoning is expected to take around two years and will further support the Government’s housing targets that rebalance the delivery of new homes around existing infrastructure.

&nbsp;

&nbsp;

Next stop Woollahra train station - delivering up to 10,000 new homes in the heart of Sydney

Banking Sector

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The ACCC has announced an update on the timeline for the implementation and launch of the Consumer Data Right (CDR) in the banking sector, deferring the launch of certain aspects from February to July 2020.
Consumers will be able to direct major banks to share their credit and debit card, deposit account and transaction account data with accredited service providers from 1 July 2020. Consumers’ mortgage and personal loan data will be able to be shared after 1 November 2020.
The ACCC has formed the view that this updated timeline for these aspects of the CDR reforms will allow additional implementation work and testing to be completed and better ensure necessary security and privacy protections operate effectively.
“The CDR is a complex but fundamental competition and consumer reform and we are committed to delivering it only after we are confident the system is resilient, user friendly and properly tested,” ACCC Commissioner Sarah Court said.
“Robust privacy protection and information security are core features of the CDR and establishing appropriate regulatory settings and IT infrastructure cannot be rushed.”
The ACCC will make the CDR Rules in January 2020 that reflect this adjustment to the timetable, and will conduct further consultation regarding any consequential changes to other phases of the CDR.
The Consumer Data Right will give consumers the right to safely access data about them, held by businesses, and direct this information be transferred to trusted third parties of their choice.
Banking will be the first sector to which the CDR applies. The CDR will subsequently be rolled out sector-by-sector, with banking being followed by energy and telecommunications.
Data portability increases competition, particularly for more complex products and services, and allows businesses to make more tailored offerings to consumers.
The ACCC has been working closely for several months with the big 4 banks and the 9 entities selected to be the initial data recipients to test and refine the CDR ecosystem.
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j.ballantyne1990-6AQqhLzZaK

Start date for bank sharing of consumer data details delayed

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The Federal Treasurer Josh Frydenberg has asked the ACCC to investigate the banking sector over its refusal to pass on interest rate cuts to customers in full. 
He has asked the Australian Competition and Consumer Commission to look into the pricing of residential mortgage products.
The competition watchdog will also report back on any obstacles customers face in switching banks. 
It will examine the entire sector but the Government has made it clear that the big four banks will be the focus.
The ACCC is able to use “compulsory information-gathering powers” to obtain data from financial institutions, through holding an inquiry under Part VIIA of the Competition and Consumer Act (2010).
“We will aim to provide answers to the questions that banking customers have long asked,” said ACCC chair Rod Sims.
Mr Frydenberg said customers are "sick and tired of the merry dance" as the banks have neglected to pass on the rate in full despite consistent calls from the Government and the RBA. 
"The banks have just ignored that advice and that call," Mr Frydenberg said. 
"We need the ACCC to use its particular powers to compel documentation to lift the hood and get to the bottom of this issue." 
"The Aust people are sick of the merry dance where the RBA reduces the cash rate, political leaders AND the RBA call on the banks to pass them on in full AND that advice is ignored."
However Mr Frydenberg ruled out introducing legislation to force the banks to pass on the rate in full.
He phoned the chief executives of the big four banks on Sunday and told them the inquiry could help them "clear the air" and explain why they had not passed on the rate in full. 
The Australian Banking Association (ABA) has said the banks stand ready to assist the ACCC in the inquiry.
"Banks are no stranger to public scrutiny and look forward to the opportunity to cast more light on mortgage pricing and the many important factors that influence the setting of interest rates," the ABA advised.
"The first priority of Australia’s banks is the implementation of the Royal Commission.
"Banks are also working night and day to prepare for the Consumer Data Right to empower customers to more easily shop around for the financial service that best meets their needs."
The Customer Owned Banking Association (COBA) has welcomed the ACCC's inquiry into home loan pricing and competition in the retail banking market.
COBA’s director of strategy Sally Mackenzie said it’s important that the inquiry investigates ways to make it easier for consumers to switch banks while avoiding more red tape.
“This inquiry is an opportunity to deliver a more competitive banking sector by examining what is holding consumers back from switching bank providers.
“Empowering consumers to switch their banking and to shop around is an unambiguously good thing.
“A more competitive market will make all players care more about their customers.
“There are barriers that prevent consumers from switching, which makes it challenging for smaller banks to win market share from the big four banks.
“Consumers can benefit personally by shopping around, and the market will function more effectively if there is more intense competition for borrowers.
“It’s important that policy makers empower consumers to drive competition.
“Policy makers need to careful consider regulatory interventions because smaller players are already subject to a disproportionately high regulatory burden.
“We look forward to this inquiry coming up with creative new ways to unleash consumer power.”
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Banks' failure to pass on rate cuts to home loan customers prompts ACCC inquiry

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GUEST OBSERVATION
Banks’ funding costs increased a little over 2018, driven by a rise in the cost of wholesale funding linked to money market rates, but with some offset from reductions in the cost of retail deposits. Most lenders passed the increase in funding costs through to their lending rates, including for mortgages. Nevertheless, funding costs and lending rates remain low by historical standards.
Funding costs typically influence lending rates
The rates that banks offer on loans to households and businesses are partly driven by the cost of their funding. Banks also take into account the risks inherent in lending, such as the credit risk associated with loans and the liquidity risk involved in funding long-term assets with short-term liabilities. Competition in the financial sector, banks’ growth strategies and the rate of return desired by equity holders also affect their lending rates.
The level of the cash rate is an important determinant of banks’ funding costs (Graph 1). This is because the cash rate acts as an anchor for the broader interest rate structure of the domestic financial system. The pass-through from the cash rate to funding costs and lending rates is an important channel of monetary policy transmission. Nevertheless, there are other factors that influence funding costs, such as changes in the level of compensation required by investors for holding bank debt. The full effect of such changes can take some time to flow through to funding costs and lending rates. This article updates previous Reserve Bank research, focusing on developments in major banks’ funding costs and lending rates over 2018.
<div class="image-graph">
<div class="title">Graph 1</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-01.gif" alt="Graph 1: Cash Rate and Funding Costs">
</div>
The cost of banks’ funding increased a little over 2018, driven by the higher cost of raising funds in wholesale debt markets as a result of increases in money market rates, in particular the rise in bank bill swap (BBSW) rates. The costs of around two-thirds of the major banks’ debt and deposit funding are ultimately linked to BBSW rates, either directly or as a result of their interest rate hedging practices. The major banks’ overall funding costs have increased by less than money market rates because of the decline in interest rates on retail deposits, which account for around one-third of their non-equity funding.
Most lenders, including the major banks, have passed the increase in funding costs through to their lending rates. However, the average interest rate on outstanding housing loans increased only a little toward the end of 2018, and by less than the increases in banks’ standard variable rates (SVRs) for housing loans. This owed in large part to strong competition for low-risk borrowers, as observed through the larger discounts that banks offered from their SVRs. Rates on loans to businesses also increased, particularly for large business loans, since many of these loans are linked to BBSW rates. Despite the increases, both funding costs and lending rates remain historically low, consistent with the low level of the cash rate.
Banks’ funding composition was little changed over 2018
Banks obtain funding from four main sources: retail deposits, wholesale deposits, wholesale debt and equity. Excluding equity, around one-third of major banks’ funding is from retail deposits. These are sourced from households and small- to medium-sized businesses. Another third of non-equity funding is from wholesale deposits, such as those from large corporations, pension funds and the government. Short- and long-term wholesale debt account for most of the remaining third of funding. The composition of major banks’ funding was little changed over 2018 (Graph 2).
<div class="image-graph">
<div class="title">Graph 2</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-02.gif" alt="Graph 2: Major Banks Funding Composition">
</div>
In aggregate, deposits account for around two-thirds of major banks’ non-equity funding. This share has been relatively stable over recent years, following a large increase in the share of deposits in the aftermath of the global financial crisis. That increase was consistent with banks seeking more stable funding, particularly from term deposits (Graph 3). The introduction of new liquidity regulations – such as the Net Stable Funding Ratio requirement that came into force at the start of 2018 – has also supported the banks’ demand for stable funding over recent years. Deposit growth slowed in 2018, in line with the generally subdued growth in banks’ assets.
<div class="image-graph">
<div class="title">Graph 3</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-03.gif" alt="Graph 3: Deposit Growth">
</div>
The share of funding sourced by the major banks from wholesale debt markets was little changed over 2018. Within this, the major banks shifted their funding slightly, moving away from short-term debt toward long-term debt (Graph 4). A large share of wholesale debt funding for the major banks is sourced from offshore markets, mainly in US dollars. Australian banks transform most of these foreign-currency denominated exposures into Australian-dollar denominated exposures using the cross-currency swap market. As a result, Australian banks are far less sensitive to changes in interest rates in other jurisdictions than their share of offshore funding may suggest.
<div class="image-graph">
<div class="title">Graph 4</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-04.gif" alt="Graph 4: Major Banks' Wholesale Debt">
</div>
The share of funding from equity has been stable
In addition to deposits and debt, banks obtain a small portion of their funding from equity. The share of funding from equity has been stable over recent years. Since mid 2015, banks have increased their stock of equity funding by around $40 billion. This was largely in response to changes in prudential regulations that have increased the average mortgage risk weights, and therefore the amount of capital that banks are required to hold. The major banks continue to indicate that they are on track to meet the Australian Prudential Regulation Authority’s (APRA) increased ‘unquestionably strong’ capital benchmarks by 2020 (as expected by APRA). Distinct from its ‘unquestionably strong’ benchmarks, APRA consulted on plans in late 2018 to implement a loss-absorbing capacity regime in Australia from 2023 (APRA 2018).
Banks' funding costs are a little higher than in recent years but remain low
We estimate that overall debt and deposit funding costs for the major banks increased by around 10 basis points over 2018 (Graph 5). This was driven by increases in the costs of wholesale debt and wholesale deposits. Nevertheless, funding costs remain low by historical standards.
<div class="image-graph">
<div class="title">Graph 5</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-05.gif" alt="Graph 5: Major Banks' Funding Costs">
</div>
The cost of wholesale funding increased …
Wholesale funding – which includes both wholesale debt and wholesale deposits – accounts for around two-thirds of major banks’ non-equity funding. Wholesale funding costs tend to be roughly linked to BBSW rates, which increased in 2018 (Graph 6).
<div class="image-graph">
Graph 6
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-06.gif" alt="Graph 6: Bank Bill Swap Rates">
</div>
BBSW rates measure the cost for highly rated banks in Australia to issue short-term bank paper with tenors of up to six months. These rates are some of the key interest rate benchmarks for the Australian dollar and are widely used as reference rates in contracts including derivatives, loans and securities (Alim and Connolly 2018). BBSW rates are heavily influenced by expectations for the cash rate, although they are also affected by other factors, including developments in offshore money markets and changes in the demand for short-term bank paper from investors.<a id="r1" href="https://www.rba.gov.au/publications/bulletin/2019/mar/developments-in-banks-funding-costs-and-lending-rates#fn1"> </a>
The cost of wholesale debt for Australian banks is ultimately linked to BBSW rates either directly or as a result of their interest rate hedging practices. In addition to issuing floating-rate Australian-dollar denominated debt (at a spread to BBSW rates), banks swap much of their foreign-currency denominated or fixed-rate debt into Australian-dollar floating-rate exposures by using derivatives that typically use a BBSW rate as the reference rate. These hedging practices better align movements in the rates on Australian banks’ funding with those that they receive on their assets, which consist largely of loans that are variable rate and denominated in Australian dollars. Rates on wholesale deposits also tend to be closely linked to BBSW rates. In particular, wholesale term deposits are close substitutes for bank paper of the same tenor, so the rates offered on these deposits tend to move with BBSW rates.
Wholesale funding costs moved broadly in line with BBSW rates over 2018, with BBSW rates around 20 basis points higher than their average in 2017 (Graph 6). In particular, BBSW rates rose noticeably toward the end of the March, June and December quarters, as did other short-term money market rates in Australia and offshore. Most of the impact of a change in BBSW rates flows through to wholesale funding costs in three to six months, with the time frame varying between banks based on the maturity profiles of their short-term debt, wholesale deposits and interest rate hedging instruments. The increases in BBSW rates were reflected in higher costs for outstanding short-term and, to a lesser extent, long-term wholesale debt. Nevertheless, wholesale funding costs remain low relative to recent history (Graph 7).
<div class="image-graph">
Graph 7
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-07.gif" alt="Graph 7: Major Banks' Wholesale Debt Costs">
</div>
A few factors other than BBSW rates also put upward pressure on the cost of wholesale debt in 2018, although their contributions were relatively small. The major banks’ wholesale debt that is issued offshore was affected by increases in cross-currency basis swap spreads, which measure the cost of swapping foreign-currency exposures into Australian-dollar exposures. In particular, the major banks’ cost of sourcing short-term debt funding in US dollars and swapping it into Australian dollars increased by a little more than the increases in BBSW rates (Graph 8). Nevertheless, Australian banks may still prefer to issue offshore – even when it appears to be relatively more expensive – to diversify their funding base (Kent 2018). The slight shift in the composition of wholesale debt from short term to long term added a little to funding costs, along with an increase in the average original tenor of the major banks’ long-term debt.
<div class="image-graph">
<div class="title">Graph 8</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-08.gif" alt="Graph 8: Major Banks Marginal Cost of Short-term Debt">
</div>
Banks continued to issue wholesale debt at relatively low yields in 2018. Australian banks issued bonds at a similar pace to previous years, with around $115 billion of bonds issued in the year. Net issuance, which takes into account bond maturities, was high in 2018, with issuance outpacing scheduled maturities by around $25 billion. Although spreads to benchmark rates for the major banks’ bonds widened over 2018, yields remained little changed around the low levels of recent years (Graph 9).
<div class="image-graph">
<div class="title">Graph 9</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-09.gif" alt="Graph 9: Major Banks Bond Pricing">
</div>
… but this was partly offset by a decrease in the cost of retail deposits
Major banks’ funding costs increased by less than money market rates because the cost of retail deposits declined. Major banks’ overall deposit costs therefore fell over 2018, even though wholesale deposit rates increased (Graph 5). The decline in the cost of retail deposits was in large part due to substantial reductions in all of the major banks’ base rates on online savings accounts (excluding any ‘honeymoon’ or introductory bonus rates) (Graph 10). Honeymoon rates on online savings accounts were little changed. Partly offsetting this, there was a small increase in the major banks’ average rate on bonus savings accounts. Major banks’ advertised rates on retail at-call deposits remain low relative both to historical rates and to rates currently offered by non-major banks.
<div class="image-graph">
Graph 10
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-10.gif" alt="Graph 10: Major Banks' Retail Deposit Rates">
</div>
Although rates on new retail term deposits were little changed over 2018, the cost of outstanding term deposits fell slightly because some term deposits that were contracted at higher rates in earlier years have since been replaced by term deposits at lower rates. However, the impact of this on overall funding costs was somewhat offset by a change in the mix of deposits toward term deposits, which typically have higher interest rates than at-call deposits.
Banks increased their lending rates a little, but they remain low
Most lenders passed the increase in funding costs through to their lending rates for households and businesses. But lending rates remain low, consistent with funding costs and the cash rate.
Interest rates on housing loans rose a little for many borrowers over 2018. Most banks increased their SVRs on housing loans in the second half of 2018 by around 10–15 basis points. The banks generally attributed the increases to higher funding costs. However, the average interest rate on outstanding variable rate housing loans increased by only a few basis points over the second half of the year (Graph 11). This was partly because not all lenders raised their SVRs in that period; one of the major banks increased its housing SVRs in early 2019. In addition, interest rates on new housing loans continued to be significantly lower than interest rates on outstanding loans, which provides an indication of the strength of competition for low-risk borrowers. Some existing borrowers refinanced at a lower rate with a different lender or renegotiated the rate of their loan with their existing lender. Moreover, advertised interest rates on fixed-rate housing loans, which account for around one-fifth of outstanding housing credit, declined throughout 2018.
<div class="image-graph">
<div class="title">Graph 11</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-11.gif" alt="Graph 11: Variable Housing Interest Rates">
</div>
Interest rates on outstanding loans to large businesses are estimated to have increased by around 35 basis points over 2018, reflecting in part the increases in BBSW rates (Graph 12). Most loans to large businesses are linked to BBSW rates. Rates on loans to small businesses were little changed over the year, though they remain noticeably higher than those for large businesses. Some banks increased their advertised rates for small businesses toward the end of 2018, citing higher funding costs.
<div class="image-graph">
Graph 12
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-12.gif" alt="Graph 12: Variable Business Lending Rates">
</div>
Banks’ implied lending spread narrowed a little
A bank’s implied spread on its outstanding lending is the difference between its average lending rates and overall funding costs. We estimate that this spread narrowed slightly for the major banks over 2018 (Graph 13). The implied lending spread did not narrow by as much as the increase in funding costs because much of this increase was passed through to an increase in lending rates, including for mortgages and large business loans.
<div class="image-graph">
<div class="title">Graph 13</div>
<img src="https://www.rba.gov.au/publications/bulletin/2019/mar/images/graph-0319-2-13.gif" alt="Graph 13: Major Banks Funding Costs and Lending Rates">
</div>
The implied lending spread differs from some commonly reported measures of bank profitability (for example, the net interest margin), because it excludes the returns on banks’ other interest-earning assets, such as high-quality liquid asset holdings. Yields on some of the banks’ liquid assets rose over 2018, consistent with increases in BBSW rates. The effect of this was to dampen the impact of higher funding costs on banks’ net interest margins.
Susan Black and Dmitry Titkov are from Domestic Markets Department at the Reserve Bank of Australia (RBA). 
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Developments in Australia banks' funding costs and lending rates: RBA Bulletin 

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GUEST OBSERVATION
The leaders of our banks and financial institutions are seen as the most self-serving in the nation, according to a national survey undertaken by researchers at Swinburne University of Technology.
More than a third (35.4%) of respondents believe banking and financial institutions show “no leadership for the greater good”. This score is slightly worse than public perceptions of the Federal Government, substantially worse than religious institutions and significantly worse than trade unions.
The results, from a nationally representative sample of 1,000 Australians, also repudiate the <a href="https://www.ausbanking.org.au/media/media-releases/media-release-2018/banks-making-progress-in-delivering-better-customer-outcomes" target="_blank">Australian Banking Association’s claim</a> a year ago that “Australians believe banks are heading in the right direction”.
And given this survey was done in December 2018, before the <a href="https://financialservices.royalcommission.gov.au/Pages/default.aspx" target="_blank">Banking Royal Commission</a> had completed its work exposing misconduct in the financial services sector, it’s likely a future poll will show even greater community distrust of bankers.
Transparency and accountability are crucial
Our findings come from the initial results of the Australian Leadership Index, a new quarterly survey from the Swinburne Business School that measures and tracks community perceptions and expectations of leadership for the greater good across 13 societal institutions.
The index won’t be officially published until later in the year. But given the important public discussion about corporate leadership in the wake of the <a href="https://treasury.gov.au/publication/p2019-fsrc-final-report/" target="_blank">final report</a> of the banking royal commission, we think it’s useful to share a snapshot of our findings.
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Consistent with other <a href="https://www2.deloitte.com/au/en/pages/financial-services/articles/deloitte-trust-index-banking-survey?utm_source=wp&amp;utm_medium=blog&amp;utm_campaign=fsi-deloitte-trust-index-2018&amp;utm_content=web" target="_blank">studies</a> that highlight the importance of transparency and accountability to perceptions of trust, our research confirms the importance of these attributes to perceptions of leadership for the public good.
From a community perspective, leadership for the greater good occurs when leaders demonstrate high ethical standards, when they demonstrate transparency and accountability for their positive and negative impacts, and when they seek to balance the interests of multiple stakeholders, including the wider community in which their institutions are nested.
So, leadership for the greater good is reflected in what value leaders create, how they create value, and for whom they create value.
Unhappily, banking leaders are found wanting on all counts.
The importance of how value is created
But other institutions are also found wanting, with our results revealing a generalised pessimism about Australian leadership.
Our survey results shed light on where the public think leaders are failing and what the community expects of leaders and their institutions to serve the greater good.
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Notably, creating economic value is not a highly regarded aspect of leadership for the greater good. This is not to say it is unimportant. But on its own it is insufficient.
What looms largest in the public mind when thinking about the greater good is the social value that institutions create, how ethically they create this value, and their transparency and accountability for positive and negative impacts.
Our research demonstrates that leadership for the greater good is as much about how leaders create value for their stakeholders — from their employees to their customers to society-at-large — as it is about what value they create and for whom they create value.
It’s not hugely complicated.
And yet, as revealed by the endless, unedifying parade of misconduct in government, business, religious, sporting and other civil society institutions, community standards and expectations are too often observed in the breach.
In the wake of the banking royal commission, the Australian community has a golden opportunity for a thoroughgoing discussion about the leadership we need to protect and enhance the public interest.
We hope the Australian Leadership Index will contribute to that discussion, by making all our data freely accessible through a new data visualisation platform. This will enable easy tracking of how institutions are performing according to public perceptions of their impact on the public good.
Wise leaders focus on the greater good. It behoves all leaders to create this new culture of public leadership.<img src="https://counter.theconversation.com/content/111346/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Samuel Wilson, Senior Lecturer in Management, Swinburne University of Technology
Jason Pallant, Lecturer of Marketing, Swinburne University of Technology 
Timothy Colin Bednall, Senior Lecturer in Management, Fellow of the APS College of Organisational Psychologists, Swinburne University of Technology
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/one-third-of-australians-think-banks-do-nothing-for-the-greater-public-good-111346" target="_blank">original article</a>.
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One-third of Australians think banks do nothing for the greater public good

Australian banking needs to start preparing for a rainy day: APRA's Wayne Byres

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GUEST OBSERVER
The irresponsible (if not predatory) lending and the selling of “junk” financial products highlighted by the Financial Services Royal Commission should raise concerns for regulators, educators and parents interested in financial literacy.
Research shows a strong correlation between financial literacy and literacy and numeracy skills. Literacy and numeracy are critical for, among other things, making sense of product disclosure statements and understanding the impact of loan terms and interest rates on the total amount to be repaid.
But teaching financial literacy requires going beyond these skills, by cultivating a healthy scepticism of financial institutions and the capabilities and confidence to make informed financial decisions.
There is a strong relationship between a low socioeconomic background and low financial literacy in both adolescents and adults.
It’s not just disadvantaged and vulnerable groups that struggle with financial decision-making. People who are highly educated in finance also make poor decisions – for instance, by focusing too much on growing their assets and ignoring risks.
But studies show that when regulation is effective and the financial system can be trusted, even consumers with limited financial knowledge and information-processing capabilities have the potential to deal with complex financial decisions.
For example, when considering mortgage protection insurance, applicants stand to benefit from knowing the actual risk of events like serious illness or injury that can affect their ability to meet monthly loan repayments.
<h2>Building financial capability</h2>
One way to develop better financial literacy is through simulating real-world risks, rewards and decisions in safe and supportive environments. For instance, families can play games like Monopoly and The Game of Life.
Secondary school students also have access to more sophisticated online simulations, such as the ESSI Money Game and the ASX Sharemarket Game.
Hypothetical scenarios like these provide opportunities for role play, where students can practise drawing on evidence and using it to think and reason about situations.
A recent survey of teachers of Year 7-10 commerce students revealed that more could also be done to teach students how to compare and choose between banks and financial products and services, what to do in the case of a financial scam, and how to escalate an unresolved complaint.
But we also need to take a look at the role banks play in financial education. Programs like the Commonwealth Bank’s Dollarmites Club and Westpac’s Solve to Save teach children about money on the banks’ terms.
A key call to action in these programs is often to open a bank account and activate a savings plan. In the Solve to Save program, parents pay a $10 weekly subscription, which is “automatically refunded” to their child’s nominated Westpac account every week they complete three mathematics exercises.
Late last year, in response to criticism by the consumer advocacy group Choice, the Commonwealth Bank stopped kickback payments to schools related to its longstanding Dollarmites scheme.
While the banks may be proud of their investment in these education programs, they serve to position the banks as experts in money matters while cultivating trust and brand loyalty.
<h2>What does it really mean to be smart with money?</h2>
Misguided trust has exposed vulnerable individuals to the moral hazard of the banks – and underscores the importance of improved financial regulation and education moving forward.
Given that borrowing decisions are complex, multidimensional and often emotional, it’s important to consider any lender’s motives, or “What’s in it for them?” Banks are profit-driven. This means an important question to ask oneself is: “Where can I get information and support that is independent, comprehensive and easy to understand?”
In the current climate, teaching capabilities for a healthy scepticism and personal agency is the way forward.
We also need to change the public perception of what it means to be financially literate. The conventional focus on individual responsibility and wealth accumulation is flawed.
Arguably, this focus has contributed to the need for a Financial Services Royal Commission. Whether you are a bank, a mortgage broker or a consumer, the impact of your decisions on others must be carefully considered.
<img src="https://counter.theconversation.com/content/93489/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">While education can contribute to preparing all Australians for informed financial participation, the task is challenging.
Carly Sawatzki, Assistant Professor, University of Canberra 
Levon Ellen Blue, Lecturer, Queensland University of Technology
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/consumers-need-critical-thinking-to-fend-off-banks-bad-behaviour-93489" target="_blank">original article</a>.
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Consumers need critical thinking to fend off banks' bad behaviour

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Industry super fund-owned bank ME reported a rise of 8 percent in underlying net profit for the six months ended December 31, 2015 at $30.2 million on the previous corresponding period and forecast further profit growth in the second half. 
“Net interest margin in the next six months will benefit from recent rate increases following regulatory capital changes imposed on the banking sector, although this will be partially offset by the increased cost of funding that is putting current margins under pressure,” ME CEO Jamie McPhee said in a media release. 
ME’s statutory profit after tax, which includes gains on hedging instruments, was $34.5 million (HY15:$39.1 million). Net interest income rose 9 percent to $149.3 million.
But the bank's total operating expenses were up 7 percent to $133.2 million due to its investments in technology and the brand.
It said brand awareness rose 11 points to 51 percent since the bank rebranded in July 2015, resulting in customer numbers growing to 347,000.
ME’s new mobile app, launched in July 2015, has increased mobile-based transactions threefold.
The bank is close to finalising the technical infrastructure to display industry super member balances on its online and mobile banking platforms through a joint partnership with Link Group, it said.
The bank launched co-branded low-rate credit cards with AustralianSuper, Hostplus, and Cbus in late 2015, which are being marketed directly through the funds. 
McPhee said more regulatory changes were required in 2016 to further level the playing field between the regional and major banks, including the amount of capital held by the advanced model banks.
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jonathanchancellor-7SQnKwU6yx

ME Bank says mid-year profit up 8 percent, forecasts further growth

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GUEST OBSERVER
It’s reporting season, and over the past few weeks some of Australia’s biggest companies have been releasing information on how they’re travelling. 
These reports reflect key themes of how things are going in key sectors of the economy. 
Today we look at the banking sector.
The Australian banking industry is a classic economic ‘oligopoly’ with the so-called ‘Four Pillars’ or ‘Big Four’ (National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), ANZ and Westpac) dominating not only the banking sector but the whole financial sector and arguably the economy.
The big four banks account for over 25 percent of the market capitalisation of the ASX 200, and are valued at over $360 billion. In total, the four banks reported assets in 2015 of some $3.5 trillion or about 10 times the size of BHP and RIO combined, and profits for their latest financial year of over $30 billion between them.
<a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/114178/width668/image-20160308-15110-odx4a3.png" target="_blank"> Click to enlarge</a>
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/114178/width668/image-20160308-15110-odx4a3.png" alt=""><a class="license" href="https://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a>
 
 
<h2>The risks in Australia’s banking system</h2>
In an oligopoly, the dominant players operate a very similar business model. This is true of the Big Four, which operate within a structure known as ‘universal banking’. Not only do each of these behemoths run a traditional retail and business bank, they also have wealth management (mainly retail superannuation fund management) and insurance subsidiaries. To complete the picture, each of the four runs a wholly owned bank in New Zealand, again dominating the banking system in that country. The banks operate throughout Australasia, often with competing branches (and valuable jobs) in each small town - Australia is ‘over banked’.
The risks of having one of the most concentrated banking systems in the world were outlined in 2012 by the International Monetary Fund (IMF), it warned that Australia’s banks had: “broadly similar business models and reliance on offshore funding leave them exposed to common shocks and disruptions to funding markets. Against a still worrying global environment, these risks will need to be closely monitored, particularly if the domestic economy slows sharply.”
Among the four banks, there is constant jockeying for prominence and any one time one bank climbs to the top of the pile. At the moment, the clear winner is CBA, largest by capitalisation, latest annual profits and staff employed with the lowest Cost to Income Ratio (CIR). Another winner is Westpac, the smallest by assets and employees but with an enviable CIR and Net Interest Margin (NIM) leading to excellent profit results. Meanwhile, NAB trails the others by profitability and with a low NIM and high CIR, will be likely do so for some time. Nonetheless, NAB is by any standards a very profitable company, if a bit overshadowed by the other banks this year.
It should be noted that not all banks report their financial results at the same time in a completely consistent fashion. However each quarter the banks are required to report their risk numbers to the Australian Prudential Regulation Authority (APRA), the banking regulator. These so-called APS 330 reports give a picture (albeit slightly murky) of where banks are taking risks and the size of those risks.
These numbers show that the banks hold roughly similar amounts of assets, so-called Risk Weighted Assets (RWA) and associated capital. Although Westpac, being slightly smaller, has about 10 percent less of each. This data shows Big Four banks are still predominantly lending institutions with about 86 percent of their Risk Weighted Assets (RWAs) related to credit.
While ANZ has a higher proportion of corporate and business lending than the others, about 23 percent of its credit (RWAs) relates to retail, mainly residential mortgage, lending. With a few notable exceptions, such as CBAs exposure to interest rate risks and NAB’s operational risks, the risk numbers are similar across the banks.
From an analysis of prior APS 330 reports (not shown), it appears that, although the RWAs for residential mortgages have increased slightly for all banks (mainly because lending has increased), the banking sector has not factored in much additional capital to cover the potential for the busting of a housing bubble.
The large Australian banks will in the next year face headwinds from a number of directions. First, any busting or even deflation of Australia’s real or imagined housing bubble will undoubtedly give the banks serious headaches.
Likewise, the end of the mining boom is already beginning to take its toll on mining companies, even the largest. If the gloom spreads, loans to the sector might be under pressure. Last, but far from least, banking scandals will definitely come to the fore this year especially market manipulation and product misselling.
<h2>Disruption from technology</h2>
Following the retreats of both NAB and ANZ from their respective overseas forays, it looks like the four banks are going to resemble each other even more as they are all embarking on strategies that target the same Australasian retail, mortgage and business markets. But there is at least one significant point of difference between the banks that might give a clue to potential shifts in future.
In banking, as in other industries, technology is critical. After an outsourcing deal that went sour, in 2008 the CBA board was forced (some say was brave enough) to embark on a complete refresh of its ageing IT systems, often called a Core Systems Replacement (CSR).
After some significant project blowouts, CBA eventually got the CSR to work and their annual profit numbers are beginning to reflect that success. Meanwhile, NAB is in the middle of its almost decade long CSR project (called Nextgen) and is constantly changing its management, which does not bode well for its completion in the near future. On the other hand, the new Chief Information Officer (CIO) of Westpac has denied that the firm needs a CSR, and has embarked on a much needed face-lift to the bank’s ageing systems.
After a number of attempts to change its core systems, the new management of ANZ have just announced that they are hiring an ex-Google executive to become its head of ‘digital banking’ - but to do what is still not certain.
Given the oft repeated fact that some 70 percent of IT projects fail, it looks like one or more of the banks are in for some big headaches over the next decade.
For this snapshot, the information is collected from the latest annual reports (2014-2015), except for CBA which reported its semi-annual numbers in February 2016. The risk figures are taken from the 2016 December quarter APS 330 reports of the banks to APRA, which are available at the banks’ websites.
Pat McConnell is honorary fellow, Macquarie University Applied Finance Centre, Macquarie University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/pat-mcconnell-13137" target="_blank">here</a>.
 
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