Question

How was ANZ Bank impacted by the regulations after the global financial crisis (GFC)?

Please explain and analyse in details, thanks.

Answer 1

After Global Financial crisis, the Central Bank of Australia has taken many initiatives. These regulatory initiatives had impacted the functioning of ANZ.

As directed by the central bank of Australia,

ANZ had a tie up with Australian Payments Clearing Association (APCA) on implementing the new ‘tick and flick’ switching service which would enable the customers to sign one form switching financial institutions, to authorise their new provider to arrange the transfer of all automatic transactions linked to the customer’s account.

Alternative funding sources:

ANZ 's

Three main factors have driven an increase in ANZ’s funding costs over recent years: 1.The increase in the cost of customer deposits due to greater competition between deposit-takers; 2.The increase in term wholesale funding costs from 20 bps above the 90-day Bank Bill Swap Rate (BBSW) in 2007 to an average of 165 bps above BBSW today; and 3.The change in the mix of funding with an increase in customer deposits and longer-dated term wholesale funding.

Interest to be paid on deposits has increased drastically:

In 2007 the rate offered by ANZ on a 90-day term deposit was very similar to the RBA cash rate. Today, it is around 100 basis points above the cash rate.

Even if the cost of wholesale funding did not rise further, the average cost of ANZ’s wholesale funding portfolio would continue to rise gradually as cheaper pre-GFC debt expires and is refinanced with more expensive debt at today’s prices.

IMPACT ON LENDING ANZ’S INTEREST RATE POLICY:

In January 2012, ANZ began reviewing its variable home loan and small business interest rates on the second Friday of each month, with any changes to take effect on the following Friday. In the past, Australian banks generally have announced interest rate changes following the RBA announcement of its cash rate on the first Tuesday of each month. Since January 2008, ANZ has changed its mortgage and small business lending rates beyond movements in the RBA cash rate.