ME Bank practices Bail-In ?

Discussion in 'Markets & Economies' started by JulieW, May 2, 2020.

  1. JulieW

    JulieW Well-Known Member Silver Stacker

    Joined:
    Oct 14, 2010
    Messages:
    13,411
    Likes Received:
    2,704
    Trophy Points:
    113
    Location:
    Australia
    https://www.theguardian.com/austral...shes-amount-they-can-withdraw-from-home-loans



    ME Bank has slashed the amount an estimated 20,000 customers can redraw from their home loans by thousands of dollars, drawing outrage from borrowers hoping to use the money during the coronavirus crisis.

    A spokesman for the bank, which is owned by a group of industry super funds, said it made the move after figuring out that “the redraw facility of some legacy home loans could lead to some customers falling behind their original repayment schedules”.

    Home loan redraw facilities allow borrowers to make extra mortgage payments and either use the money to pay off their loan quicker or draw down cash later on.

    Customers who have flooded the bank’s Facebook page with complaints appeared to have been caught by surprise by the move.

    Australian ministers love to bash the banks. They should bypass them instead | Richard Denniss
    “The money we lost is actually my husband’s redundancy payment as he was retrenched last week,” one customer, said in a post to the page last week.

    The customer said her redraw limit had been slashed by “over $16,000”.
     
  2. sammysilver

    sammysilver Well-Known Member Silver Stacker

    Joined:
    Apr 7, 2011
    Messages:
    6,415
    Likes Received:
    1,297
    Trophy Points:
    113
    Location:
    Sydney
    I read this with some alarm this morning. However, I expect that somewhere in the T&C this is allowed. The loan was releveraged to meet the current situation. Low act without telling the client, but I imagine the ones caught out had borrowed to the max against an inflated asset.
     
    leo25 likes this.
  3. Holdfast

    Holdfast Well-Known Member Silver Stacker

    Joined:
    Oct 15, 2009
    Messages:
    9,458
    Likes Received:
    702
    Trophy Points:
    113
    Location:
    Australia
    *ME is 100% owned by 26 of Australia’s leading industry super funds. https://en.wikipedia.org/wiki/ME_Bank

    Off topic bank news.
    *Westpac will absorb a $2.2 billion hit from a surge in bad loans.
    *National Australia Bank's 60 per cent dividend cut.
    *The Commonwealth Bank has entered into an agreement to sell AUSIEX, which trades as CommSec Adviser Services, to a Japanese firm.
    *Commonwealth Bank (CBA) will automatically drop about 750,000 customers' home loan repayments to the minimum amount.

    CBA trading at 58.84
    Westpac 15.34
    NAB 16.14

     
    66rounds likes this.
  4. 66rounds

    66rounds Well-Known Member Silver Stacker

    Joined:
    Jun 22, 2019
    Messages:
    1,732
    Likes Received:
    1,705
    Trophy Points:
    113
    Location:
    Melbourne
    Dont forget ANZ deffering dividend
    https://www.abc.net.au/news/2020-04-30/anz-announces-51pc-profit-slump-dividend-deferral/12199970
     
    Holdfast likes this.
  5. leo25

    leo25 Well-Known Member Silver Stacker

    Joined:
    Jun 8, 2010
    Messages:
    3,244
    Likes Received:
    1,461
    Trophy Points:
    113
    Location:
    Sydney
    I wouldn't call it a bail-in. Redraw facility shouldn't exist to begin with. Either you're paying off the loan or you're not.

    They should be happy the bank isn't re-evaluating their home to a true market price, then they would be stuffed. They should also be happy interest rates are extremely low too.
     
    SilverDJ and Holdfast like this.
  6. Jason1

    Jason1 Well-Known Member

    Joined:
    Aug 9, 2019
    Messages:
    541
    Likes Received:
    552
    Trophy Points:
    93
    Location:
    Qld
    parking your money inside the mortgage, Sounds like a good idea but is risky in times like this. good when times are good but bad when times are bad.
    Im sure allot of people would be re-evaluating that strategy right now if they want guaranteed access to that money later
     
  7. Oddjob

    Oddjob Well-Known Member Silver Stacker

    Joined:
    Aug 19, 2018
    Messages:
    3,504
    Likes Received:
    3,950
    Trophy Points:
    113
    Location:
    Oz
    This isn't going to end well for ME Bank. Denying customers access to their cash on the basis that they "may" fall behind on their loan repayments doesn't stand up in the courts. "Potential Event/s of Default" don't hold any water legally these days.

    Even if such is allowed in the fine print, given current economic circumstances high profile Sydney and Melb radio presenters will have a field day with this and on the back of the Royal Commission, any PR for the finance sector now is usually bad PR.

    People who are ME Bank customers will read this and think "Mmmm maybe time to move our savings from that bank...something maybe up etc".... I know I would if I had $ on deposit with ME Bank.

    I suspect ME Bank will have to back down on this otherwise they will create an air of uncertainty about themselves. Would not be surprised if the Federal Treasurer puts a call into them this weekend for a wee chat.
     
    oziwassabi, 66rounds and Jason1 like this.
  8. Jason1

    Jason1 Well-Known Member

    Joined:
    Aug 9, 2019
    Messages:
    541
    Likes Received:
    552
    Trophy Points:
    93
    Location:
    Qld
    It really depends if other banks follow, if other banks dont then yer ME will have some PR issues for sure. If the other banks follow which is a possibility then they will be fine.
    Banks are needing to protect them selves right now. Im not saying its morally right though its a bit of a dog act, but this is a known risk with redraw.
     
    66rounds, leo25 and Oddjob like this.
  9. Oddjob

    Oddjob Well-Known Member Silver Stacker

    Joined:
    Aug 19, 2018
    Messages:
    3,504
    Likes Received:
    3,950
    Trophy Points:
    113
    Location:
    Oz
    The other part to this which is unknown is whether or not some / all of those loans were 80%+ loan to value ratio (LVR) and as such most if not all banks will have lenders mortgage insurance on those loans (which the borrower paid for), thus if some of those loans are the ones in question, then ME Bank is wanting to have two bites of the cherry (re self protection) and that ain't going to fly with public opinion nor the courts.
     
    Jason1 and 66rounds like this.
  10. Jason1

    Jason1 Well-Known Member

    Joined:
    Aug 9, 2019
    Messages:
    541
    Likes Received:
    552
    Trophy Points:
    93
    Location:
    Qld
    Like I said Its a dog act and would be seen as such.
    but will other banks follow?
    This did happen in the US in 2008, So its not an unknown possible risk that goes with keeping money inside a mortgage with redraw.
    Banks did this in the US during the crash.

    I doubt the courts would have much ability to argue, if its on paper and they borrower signed it, they agreed to it. most if not all redraw agreements do have that in it.
    Not much you can do after that, unless they did it by mistake to some customers as some are suggesting in that article. those people might be able to argue it.

    It reminds me of that episode of South park with the Human-Cent-Ipad episode, with the best line ever "why didnt you just read" lol
     
    Last edited: May 2, 2020
    leo25 likes this.
  11. Davros10

    Davros10 Well-Known Member Silver Stacker

    Joined:
    Aug 6, 2014
    Messages:
    498
    Likes Received:
    356
    Trophy Points:
    63
    Location:
    Canberra
    With these Fundamentals a 5% daily rise should be justified. (sarcasm emoji)
     
  12. alor

    alor Well-Known Member Silver Stacker

    Joined:
    Jun 16, 2011
    Messages:
    8,743
    Likes Received:
    1,949
    Trophy Points:
    113
    Location:
    Pulau Alor ;)
    re-set would be best solution,so that invested people can be up in smoke :confused:
     
  13. Oddjob

    Oddjob Well-Known Member Silver Stacker

    Joined:
    Aug 19, 2018
    Messages:
    3,504
    Likes Received:
    3,950
    Trophy Points:
    113
    Location:
    Oz
    https://www.abc.net.au/news/2020-05-04/westpac-will-not-take-cash-from-home-loan-accounts/12213408

    Not surprised at WBC's position given recent bad PR they have had re AusTrac. I think the other 3 major will say something similar in quick succession and leave MEBank to twist in the wind.

    Westpac rules out tapping into home loan redraw facilities after ME Bank's move sparked outrage

    By Gareth Hutchens

    Posted 1hhour ago
    [​IMG]
    Westpac's chief executive says the bank will not take money from home loan redraw facilities.(ABC News: Michael Clements)

    Westpac says it is not going to take cash from accounts linked to its customers' home loans to help it reduce the risk of mortgage defaults, regardless of the state of the economy.

    Key points:
    • Westpac will not take cash from customer redraw facilities
    • ME Bank's decision to do so has sparked outrage
    • Some Commonwealth Bank customers had loan repayments reduced to the minimum amount
    "It hasn't even crossed my mind and it's not something we'll be doing," chief executive Peter King said.

    Mr King made the comments after ME Bank outraged customers last week by changing the rules of its redraw facility without warning customers first.

    Like other banks, ME Bank provides home loan customers with access to a "redraw facility".

    The facility allows customers to make extra mortgage repayments above the required minimum repayments which can then be counted towards an "available re-draw" which can be drawn during emergencies to pay for things such as home repairs or bills.

    But ME Bank — which is owned by 26 industry super funds — angered customers last week when, without warning, it removed money some customers had accumulated in their redraw facilities and transferred it to their mortgage accounts, leaving those customers without access to their own funds.

    [​IMG]
    ME Bank has acknowledged some money was transferred out of some redraw facilities.(ABC News: Gian De Poloni)
    Nine Newspapers, which first reported the story, quoted a customer who said the bank had removed $24,000 from her redraw facility and transferred it to her home loan without notice, even though most of her home loan had already been repaid.

    "It came as a huge shock as the money was considered savings to be used for urgent home repairs. The timing of this, given the uncertainty of jobs during the pandemic is despicable to say the least," the customer told the outlet.

    At the weekend, ME Bank provided a statement on its website acknowledging some money had been transferred out of some redraw facilities.

    However, it said the transfer only applied to "a portion of legacy loans written more than five years ago".

    "ME identified the redraw facility on some legacy home loans could lead to some customers falling behind their original repayment schedules," the statement said.

    "The redraw facility gives customers access to payments that they have made ahead of their repayment schedule.

    "By not reducing the available redraw amount over time, customers could overuse the redraw to a point where they could fall behind their original repayment schedule. This can put customers at risk of not meeting their repayment commitments, potentially leaving them open to financial hardship at the end of the loan term.

    "No money has been removed from customer accounts. The adjustment made is to the amount available for redraw."

    It said it understood the change had caused concern to some customers, "particularly in the current environment".

    [​IMG]
    Commonwealth Bank was also questioned after it automatically dropped about 750,000 customers' home loan repayments to the minimum amount.(ABC News: Greg Pollock)
    "We are reviewing the personal circumstances of each customer affected and are committed to working with them to determine how we can help with their individual financial needs," the bank said.

    "ME is in the process of contacting affected customers."

    Industry super fund shareholders of ME Bank have demanded an explanation from ME executives about last week's action.

    Also last week, the actions of Commonwealth Bank were questioned after the bank automatically dropped about 750,000 customers' home loan repayments to the minimum amount.

    CBA had sent an email to customers advising them of the change, and said customers would need to opt out if they wanted to keep making repayments over the minimum amount.

    Financial Counselling Australia chief executive Fiona Guthrie said the move would see people who were ahead on their debt paying for more interest and be locked in for longer.

    "Some people are going to miss that [CBA] email … they might just dismiss it as another piece of marketing from a bank, and they won't know what's happened until it's too late," Ms Guthrie said.

    On Monday, Westpac announced a 62 per cent profit slump due to the impact of provisions for future coronavirus-related losses and a large potential AUSTRAC money-laundering penalty.

    It reported a 6 per cent rise in revenue over the first half to $10.6 billion, but it also reported more than $3 billion in provisions to cover potential losses and costs, which dragged down net profit to $1.19 billion.

    It has had to set aside more than a billion dollars to cover potential legal costs and penalties for breaching anti-money-laundering laws.
     
  14. Court Jester

    Court Jester Well-Known Member Silver Stacker

    Joined:
    Jul 30, 2012
    Messages:
    3,382
    Likes Received:
    195
    Trophy Points:
    63
    Location:
    Gold Coast QLD
    you didnt read

    it does not read

    South-Park-007.jpg

    WHY WONT IT READ!!!!!!!!!!!!


    seiously though the point you totally missed did your tinfoil had come loose

    it was clearly spelt out they made a mistake with some legacy home loans it clearly they wernt reducing the redraw amount so have just corrected the mistake.

    I guess nutjobs be nutjobs
     

Share This Page