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SA Bank Levy Could Open Floodgates: UBS

Posted by Anton Murray Consulting on . Posted in News, Market Commentary

InvestorDaily

South Australia’s state-based version of the federal bank levy is unlikely to be the last tax increase for Australia’s major banks, says UBS. South Australian Treasurer Tom Koutsantonis announced his own version of the federal bank levy in Thursday’s budget, which is expected to raise $97 million in 2017-18. The SA bank levy will have a similar model the federal levy, taxing 6 basis points of applicable bank liabilities.

The Australian Bankers’ Association (ABA) was quick to denounce the SA bank levy as an “outrageous tax grab”, labelling it as an example of “triple dipping” by the state government. ABA chief executive Anna Bligh called on the other state premiers and first ministers to “rule out a similar tax”. But UBS bank analyst Jonathan Mott said “Pandora’s Box is officially open”, and it is possible other states will follow SA’s lead and introduce further levies on the banks.

The rest of this article can be found at investordaily.com.au.

RBA backs new FX code of conduct

Posted by Anton Murray Consulting on . Posted in News, Investment Banking News

InvestorDaily

A new code of conduct for foreign exchange traders developed together with central bankers will help an industry “suffering from a lack of trust”, says the RBA. RBA deputy governor Guy Debelle delivered a speech backing the FX Global Code of Conduct in Sydney on Thursday evening. In the speech, Mr Debelle pointed to a “lack of trust” that is “evident both between participants in the market and, at least as importantly, between the public and the market”.

There have been a series of regulatory actions against foreign exchange traders and banks in recent years – most notably at Barclays, which pleaded guilty to FX rate rigging in May 2015 paying US$2.4 billion in fines. Barclay’s former head of foreign exchange spot-trading Christopher Ashton was fined US$1.2 million by the US Federal Reserve last month. Mr Debelle said the new code of conduct sets out global principles of good practice in the FX market that will “help to restore confidence and promote the effective functioning of the wholesale FX market”.

The rest of this article can be found at investordaily.com.au.

Bank levy must be reviewed, says Senate

Posted by Anton Murray Consulting on . Posted in News

InvestorDaily

A Senate report released yesterday has recommended the government’s bank levy be reviewed after two years to asses its efficacy and its effect on banking competition. The Senate Economics Legislation committee delivered its report into the Major Bank Levy Bill 2017 yesterday, with the Coalition-controlled committee recommending minor changes. The committee recommended a review of the bank levy – which is expected to raise $6.2 billion from the four major banks and Macquarie over four years – after a minimum of two years.

The report recommended the Senate economics legislation committee examine the efficacy of the policy, its effect on competition and whether the levy is required in perpetuity. Treasurer Scott Morrison has indicated the major bank levy’s objective is to ‘repair’ the federal budget. Second, the report recommended Treasury should closely examine technical aspects to the bills to determine if changes are required to avoid double taxation.

The rest of this article can be found at investordaily.com.au.

stormy ship

June 2017

Posted by Anton Murray Consulting on . Posted in Newsletters, 2017

The recently announced Australian Major Bank Levy Bill will raise around $6.2bn over the next four years, applying to only the 5 largest banks, ANZ, CBA, NAB, Westpac and Macquarie, with the government imposing a 0.06% tax on bank liabilities. The amount raised under this levy is a bit complex because it will vary depending on a liability calculation, but will cost each bank several hundred million AUD over the levy period. There is no firm end date set for the levy but it will run at least until 2021.

This is a politically-motivated levy as the Labor party was pushing for a banking royal commission, and with the Liberal party introducing this levy this allowed the elected government to offer the public a complex liability-linked ‘bank tax’. Few Aussies will fully understand the bank levy but politically it sounds good because Aussies love a good bank beat-up, so mostly the public has been pleased with the announcement. But this is naïve.

The big banks are generous dividend payers so a huge number of Australians own banking shares, directly or indirectly via their super funds. Furthermore, many Australians also have a mortgage via one of these big 5 banks, and finally these big 5 banks also employ thousands of Australians. So while the government is saying to the banks “you better not pass on this levy”; how can they not? Quite openly, the banks have said that they cannot absorb the levy and will pass it on tocustomers, shareholders, suppliers and staff.

In summary, this bank levy is effectively a tax on most Australians, since almost every Aussie interacts with the big 5 banks in some form. To what extent the banks will pass on this levy is unclear, but arguably if the levy was passed completely onto shareholders in the form of reduced dividends this would cause the most regressive impact, in taxing many older Australians who rely on bank-share dividends as pension income. We expect that each bank will likely pass on the levy in various ways, for example in the form of out-of-cycle interest rate increases the like of which we have already seen.

Naturally, we consider how this bank levy may affect staffing in the banking sector. In short, if you work for one of these 5 banks then there will be downward pressure on your bonus and any salary increases through to 2021. The counter-point to this, is that there will be an increase in staffing within risk, compliance and regulatory programs, to demonstrate to the government and regulators a robust, compliant and ethical business to reduce the likelihood of an ongoing bank levy environment. This is really a continuation of the theme post-GFC. If you work in a balance sheet or liability-intensive sector or team, there is the possibility that your bank may decide to exit your business completely until the levy has passed, but that is probably unlikely.

Notably, if you are working for a foreign bank in Australia, you may be in for good times ahead. We may even see entire deal teams shift from domestic to foreign banks. In effect, the bank levy may create an uneven playing field, with foreign-owned banks able to prosper while the big 5 Aussie banks are burdened with a levy on liabilities.

We expect that each bank will work through this levy in their own way, although with the additional regulator push to moderate lending, this will certainly result in an upcoming decade of lowerdividend payout, lower revenue and less staffing growth for the big 5 Australian banks.

bike movement

May 2017

Posted by Anton Murray Consulting on . Posted in Newsletters, 2017

Increasingly, Investment Bankers, from grad-level Analysts to senior VPs, are getting tired of the long hours with variable reward and are seeking to make a seismic career shift into the Fintech game. In our opinion the concept of working in ‘Fintech’ is getting broader and less defined, but across our four coverage locations from Singapore, Hong Kong, Melbourne and Sydney the top 4 ways to move into Fintech off the back of your Investment Banking experience are surprisingly similar.

1. Demonstrate how your skills translate to your target Fintech employer

With every application or approach to a prospective Fintech employer, try to remind them how your IB skills can add value to their business. This is crucial if you want to make a move, because for sure the guys [or girls] you are interviewing with are probably thinking, “this guy is sharp, talks well, but he wants a lot of money, maybe we should just hire another developer instead”. So whether your background is in sales, corporate advisory or trading it’s best to target job opportunities or Fintech firms that are seeking your specific talents. This is more likely to get you an interview, and ultimately an offer to move in to Fintech.

2. Be okay with earning less

This rule applies at any level, but if you are relatively senior in banking or trading this pay adjustment may be severe. So it’s best to plan a career shift when you have a bit of cash in the bank, or ideally after a payout. With no prior track-record in Fintech, even with a move that draws heavily on your prior experience, it is likely that your base salary will be much lower. Also with any form of Fintech start-up you will probably be offered some form of equity, which realistically won’t often pay out that generously or at all. In short, you should view the move as a great opportunity to make a career tack and expect that the financial return will be less initially.

3. Learn the game: get coding!

I know you are thinking “oh man, that sounds like a lot of effort”. Well yeah, maybe, but it will give you a huge benefit when interviewing with a rapidly growing Fintech firm. Also this tip doesn’t mean you need to go enrol in a full BSc. in Computer Engineering. Just by doing a basic course in coding or website development or one of any tech related areas, demonstrates a genuine interest and commitment to diversify your experience and career. Building any form of digital tech knowledge, even at a broad theoretical or academic level, will help with every Fintech application.

4. Go start something yourself

Seriously, why not?! Life is short, and there is certainly no absolute job security in Investment Banking these days anyway! Get a few buddies together, and go create your own future. There is no more confident way to move from Investment Banking in to Fintech than to give it a crack yourself. Your idea and your execution doesn’t need to be perfect, but being involved in all aspects of actually building and creating a digital business will empower you with some exceptional knowledge to shift your career. Even if your new digital venture doesn’t get any traction, when you step into your next Fintech interview in the future, trust us, they will give you a tonne of respect.

Want to move into Fintech? Send your CV to apply@antonmurray.com and we can connect you with a diverse set of Fintech clients across Asia-Pacific.