RB launches window on banks’ financials
Until now, getting a clear picture of how the country's banks stack up against each other could be a tortuous process, involving trawling through various bank sites, or a large and far-from-straightforward spreadsheet on the Reserve Bank site.
Not any more, promises the Reserve Bank.
Next Tuesday (May 29) the bank will launch what it’s calling its “bank financial strength dashboard” - a standalone website containing a series of charts and plain English explanations “aiming to improve the comparability, accessibility and timeliness of information that banks are required to disclose to the public on their financial and prudential condition."
One potential market for the dashboard will be Jane Doe savers. The bank says it gets a surprising number of calls each week from people asking which bank is the safest, and at the moment can only point them in the direction of a financial adviser, or “our confusing as heck table”, says Toby Fiennes, head of prudential supervision for the Reserve Bank.
Other users are expected to include financial advisers looking for similar information for their clients or portfolios, financial journalists, analysts, or the banks themselves, wanting to compare their performance with that of their peers.
But the dashboard is also part of the Reserve Bank’s own push to see more transparency and disclosure, Fiennes says. It didn’t launch the dashboard as a way to keep the banks honest, but the visibility won’t hurt.
“One of the more immediate benefits is banks will feel more under scrutiny. For the first time, liquidity data going to be exposed to the world and comparable across every bank. That will have some impact on how they control their liquidity and we would expect those weaker in one area might look to make changes.”
Designed for transparency and disclosure
Banks have been in the regulatory spotlight over the last few weeks, particularly since a Royal Commission inquiry in Australia started highlighting less than honourable practices from some banks’ Australian parents. The Reserve Bank and the Financial Markets Authority recently asked banks to provide proof they were not tarred with the same dodgy practices’ brush. The deadline was last Friday.
The bank financial strength dashboard covers 20 banks and six key matrices including: capital adequacy/capital ratios; asset quality, including non-performing loans; profitability; return on assets and other balance sheet data; and most importantly liquidity.
The publication of the dashboard will be the first time bank liquidity information has been publicly available, Fiennes said.
For each matrix a person can dig deeper into the data, for example breaking down banks' loans portfolios to see how much is agricultural, residential or commercial loans.
There will also be credit ratings information, and links to other sites with details about, for example, any breaches.
The first lot of data to be available will be for the first quarter of 2018, and it will be then be updated quarterly. The bank initially aimed to get each quarter’s information onto the dashboard within four weeks, but had to pare back that target to six-to-eight weeks when it became obvious some information took longer.
Still, it’s better than the three-to-four month wait at the moment, Fiennes said. And even eight weeks was something the Reserve Bank had to negotiate with the banks on.
Tobias Irrcher, who led the dashboard project and bears the less-than-plain English title of senior statistical analyst for the prudential supervision department, says some retail banks were originally concerned about the Reserve Bank taking over control of how and when their financial information was released. But on the flipside they welcomed the opportunity to compare themselves more easily with their competitors.
Once the bank dashboard is bedded down, probably in a year’s time, Irrcher said they’ll look at whether they could introduce similar dashboards for non-bank deposit takers, such as credit unions, and for the insurance industry.
“That will give us a chance to talk to the insurance companies about their data and making sure it’s in a good enough shape.”
If possible, the insurance industry is even more in the sights of regulators and the government at the moment than the banks. Over the last three months, there have been two highly critical FMA reports into conflicted remuneration practices, and yesterday Consumer Affairs Minister Chris Faafoi launched a public consultation process into insurance contract law.
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