1
00:00:00,200 --> 00:00:03,159
Speaker 1: Speaking of the Reserve Bank, they are changing some banking

2
00:00:03,240 --> 00:00:05,960
Speaker 1: rules and there is just a glimmer of hope that

3
00:00:06,000 --> 00:00:08,280
Speaker 1: it might result in lower mortgage rates for all of us,

4
00:00:08,280 --> 00:00:11,040
Speaker 1: So we're interested in this. Banks will no longer be

5
00:00:11,119 --> 00:00:13,880
Speaker 1: required to hold as much capital in case they run

6
00:00:13,880 --> 00:00:17,000
Speaker 1: into trouble, get into a tight spot. Those were the

7
00:00:17,040 --> 00:00:20,120
Speaker 1: rules that Adrian or put in place. You'll remember it

8
00:00:20,200 --> 00:00:22,640
Speaker 1: was for a worst case scenario. But the result was

9
00:00:22,720 --> 00:00:25,360
Speaker 1: higher funding cost for banks, which they've been telling us about,

10
00:00:25,480 --> 00:00:29,800
Speaker 1: worse competition for customers. Mark Wiltshire is the chief executive

11
00:00:29,840 --> 00:00:32,199
Speaker 1: at the Cooperative Bank and joins me this evening, Mark,

12
00:00:32,200 --> 00:00:32,960
Speaker 1: Good evening.

13
00:00:33,560 --> 00:00:34,360
Speaker 2: Good evening, Ryan.

14
00:00:34,800 --> 00:00:38,599
Speaker 1: So how does this change affect the Cooperative Bank or

15
00:00:38,640 --> 00:00:39,000
Speaker 1: does it?

16
00:00:39,200 --> 00:00:42,400
Speaker 2: Yeah, it does a couple of things. Really, it's good

17
00:00:42,400 --> 00:00:45,760
Speaker 2: news for smaller banks. It basically lowers the amount of

18
00:00:45,880 --> 00:00:49,120
Speaker 2: capital you have to set aside in case of emergency.

19
00:00:49,280 --> 00:00:52,040
Speaker 2: So you want banks to hold some capital, but too

20
00:00:52,159 --> 00:00:54,160
Speaker 2: much is a drag and a cost and a constraint

21
00:00:54,440 --> 00:00:58,440
Speaker 2: on getting out there and competing for customers, so you

22
00:00:58,440 --> 00:01:01,440
Speaker 2: want to encourage competition. For us, it allows us takes

23
00:01:01,440 --> 00:01:04,280
Speaker 2: that constraint away by lowing that amount of capital. So

24
00:01:04,280 --> 00:01:06,360
Speaker 2: we can get out there and have more appetite for growth.

25
00:01:06,520 --> 00:01:09,400
Speaker 1: The total is three point four billion less. I'm told

26
00:01:09,440 --> 00:01:12,640
Speaker 1: how much less would the co op bank need to

27
00:01:12,040 --> 00:01:13,920
Speaker 1: or be required to hold.

28
00:01:14,720 --> 00:01:19,360
Speaker 2: Yeah, it's quite significant. So in a percentage terms, the old

29
00:01:19,440 --> 00:01:22,000
Speaker 2: rate was about seventeen percent of the capital ration and

30
00:01:22,040 --> 00:01:25,520
Speaker 2: it drops down to fourteen, so quite a significant reduction

31
00:01:25,760 --> 00:01:29,679
Speaker 2: for us. We'll run the numbers on exactly where we

32
00:01:29,720 --> 00:01:31,880
Speaker 2: want to land because we do our own assessment as well.

33
00:01:31,959 --> 00:01:34,200
Speaker 2: Now we've got this, but that lower minimum is a

34
00:01:34,200 --> 00:01:34,800
Speaker 2: big help.

35
00:01:35,080 --> 00:01:38,080
Speaker 1: Does it And does it mean that the system is

36
00:01:38,160 --> 00:01:40,120
Speaker 1: more risky? No?

37
00:01:40,200 --> 00:01:43,319
Speaker 2: I think it's achieving the right balance and they've aligned

38
00:01:43,319 --> 00:01:47,000
Speaker 2: this with Australia as well, very consistent with the APPARA rules.

39
00:01:47,000 --> 00:01:49,640
Speaker 2: So they were pretty high before, so I think they've

40
00:01:49,640 --> 00:01:53,960
Speaker 2: come back to a better level. And it's that balance

41
00:01:53,960 --> 00:01:56,200
Speaker 2: of you want resilience but you don't want to be

42
00:01:56,240 --> 00:01:58,760
Speaker 2: too much of a cost that gets passed on to customers.

43
00:01:59,080 --> 00:02:02,120
Speaker 2: So this should slow through to customers by allowing more

44
00:02:02,160 --> 00:02:05,920
Speaker 2: competition and allowing particularly domestic banks to challenge more.

45
00:02:06,360 --> 00:02:08,920
Speaker 1: So yeah, on does that mean mark that we will

46
00:02:09,360 --> 00:02:12,400
Speaker 1: Does it benefit smaller banks more so than the bigger

47
00:02:12,440 --> 00:02:15,480
Speaker 1: Australian ones or is it everybody's on an even keel.

48
00:02:16,240 --> 00:02:18,760
Speaker 2: It does benefit the overall the total market, but I

49
00:02:18,760 --> 00:02:21,440
Speaker 2: think it particularly benefits the smaller banks. Not everyone will

50
00:02:21,480 --> 00:02:23,959
Speaker 2: be happy, but for us, we think it's a really

51
00:02:24,040 --> 00:02:27,600
Speaker 2: good positive step and we certainly think it benefits us

52
00:02:27,880 --> 00:02:30,840
Speaker 2: materially and allows us to actually go out there and

53
00:02:30,840 --> 00:02:33,880
Speaker 2: grow our mortgages more and compete harder for those mortgages.

54
00:02:34,040 --> 00:02:36,160
Speaker 1: Are you going to get when you say compete, do

55
00:02:36,200 --> 00:02:38,480
Speaker 1: you men you'll give us cheaper mortgage rates? Mark?

56
00:02:38,840 --> 00:02:40,720
Speaker 2: Yeah. I mean you've got to take into account other

57
00:02:40,760 --> 00:02:43,240
Speaker 2: things like the overall race environment at any point in time,

58
00:02:43,600 --> 00:02:46,080
Speaker 2: but it does mean you're taking away some of that

59
00:02:46,160 --> 00:02:48,720
Speaker 2: cost when you factorve ed into your pricing decisions. So

60
00:02:49,720 --> 00:02:52,520
Speaker 2: you know, it's we're in a slightly rising rate environment

61
00:02:52,600 --> 00:02:55,840
Speaker 2: right now, but now we've hit the largely hit the

62
00:02:55,840 --> 00:02:59,520
Speaker 2: bottom from expectations, so it doesn't necessarily immediately translate through

63
00:02:59,560 --> 00:03:01,960
Speaker 2: to the rate today, but it will have that effect overall.

64
00:03:02,760 --> 00:03:05,799
Speaker 1: Speaking of the increase in rates, we've seen some banks

65
00:03:05,840 --> 00:03:08,440
Speaker 1: move some haven't you guys have moved on that And

66
00:03:08,560 --> 00:03:11,040
Speaker 1: does what Arna Brennan say said the other day, does

67
00:03:11,040 --> 00:03:12,160
Speaker 1: that have any impact on you.

68
00:03:12,960 --> 00:03:14,840
Speaker 2: It had a bit, so it took a little bit

69
00:03:14,880 --> 00:03:17,240
Speaker 2: of the heats, but not a lot. So you know,

70
00:03:17,320 --> 00:03:19,880
Speaker 2: we passed on about half of what those health our

71
00:03:19,960 --> 00:03:23,000
Speaker 2: rates were rising. They moved up fifty or sixty points,

72
00:03:23,320 --> 00:03:25,200
Speaker 2: they came back a little bit, but really only at

73
00:03:25,200 --> 00:03:28,440
Speaker 2: the margin. So we've passed on about thirty points onto

74
00:03:28,480 --> 00:03:31,560
Speaker 2: customers for fixed rates. And that's really important to signal

75
00:03:31,560 --> 00:03:33,320
Speaker 2: to customers that rates are starting to move up in

76
00:03:33,360 --> 00:03:36,640
Speaker 2: those longer terms, but still offering really good committive rates

77
00:03:36,680 --> 00:03:37,680
Speaker 2: at the short terms as well.

78
00:03:38,280 --> 00:03:41,960
Speaker 1: Does that mean in your eyes for those longer term

79
00:03:42,040 --> 00:03:44,800
Speaker 1: rates the only way they are going from here now

80
00:03:44,960 --> 00:03:45,320
Speaker 1: is up.

81
00:03:46,560 --> 00:03:49,320
Speaker 2: Well, that's what the market is pricing, and so for

82
00:03:49,440 --> 00:03:52,880
Speaker 2: banks to offer fixed rates and certainty for customers, they

83
00:03:52,920 --> 00:03:55,040
Speaker 2: have to hedge those in the interest rate market. And

84
00:03:55,080 --> 00:03:57,520
Speaker 2: those interest rate markets look at the longer term signals,

85
00:03:57,560 --> 00:03:59,760
Speaker 2: so they're not looking at what happened in November. They're

86
00:03:59,760 --> 00:04:01,680
Speaker 2: looking at what's happening in two to three years time.

87
00:04:02,160 --> 00:04:05,880
Speaker 2: So that outlook is increasing now, and certainly the commentary

88
00:04:05,880 --> 00:04:07,920
Speaker 2: and the outlook was for that to start increasing. So

89
00:04:08,400 --> 00:04:10,800
Speaker 2: that's why the longer term rates are starting to each up.

90
00:04:11,440 --> 00:04:14,040
Speaker 2: So I think If we're not at the bottom, we're

91
00:04:14,040 --> 00:04:16,760
Speaker 2: some we're close to it, and we'll wait and see

92
00:04:16,760 --> 00:04:19,800
Speaker 2: whether there's another ocr cat or not. Certainly the new

93
00:04:19,839 --> 00:04:23,320
Speaker 2: Reserve Bank governor has left that door open. But we're

94
00:04:23,360 --> 00:04:25,840
Speaker 2: somewhere near the bottom of that cycle, so the longer

95
00:04:25,920 --> 00:04:26,720
Speaker 2: term outlooks up.

96
00:04:27,080 --> 00:04:28,880
Speaker 1: Mark, appreciate your time. Thank you very much for being

97
00:04:28,880 --> 00:04:30,960
Speaker 1: with me. Mark Wiltshire, who's the TV executive at the

98
00:04:31,080 --> 00:04:35,159
Speaker 1: Cooperative Bank. For more from Hither Duplessy Allen Drive, listen

99
00:04:35,240 --> 00:04:38,200
Speaker 1: live to news talks. It'd be from four pm weekdays,

100
00:04:38,360 --> 00:04:40,560
Speaker 1: or follow the podcast on iHeartRadio