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Major bank urges govt to ban LRBAs
One of Australia’s major banks has backed the Financial System Inquiry’s recommendation to ban borrowing in super, after committing to not pursuing SMSF lending in its mortgages strategy.
In its response to the FSI’s final report, ANZ stated it agrees with the recommendation to remove the exception to the general prohibition on direct borrowing for LRBAs made by superannuation funds.
“ANZ has not pursued this activity as part of its mortgages strategy. ANZ believes that leverage should be limited in superannuation portfolios and we agree with the RBA and APRA that it is incompatible with the objectives of superannuation,” the submission stated.
Reactions to the FSI’s recommendation to ban borrowing in super have been mixed since the final report was released in December last year.
Recently, the Association of Superannuation Funds of Australia expressed a similar position to ANZ's, believing that in a majority of cases, leverage is inconsistent with the objectives of superannuation.
However, in its submission to the FSI’s final report, the SMSF Association urged the government to consider a range of alternatives to a ban on LRBAs, including limiting the use of personal guarantees and bringing LRBAs under the AFSL regime.
In its submission, ANZ also showed support for the FSI’s recommendation to seek broad bipartisan support for and enshrine in legislation the objectives of the superannuation system.
However, ANZ stressed that while this goal is “desirable”, it is likely to require a broader public discussion on superannuation and current issues.
“The extent to which Australians will have sufficient income to meet their retirement expectations is an important issue. Issues such as this need to be canvassed throughout the community,” ANZ stated.
[Edited]
I am saddened to hear a big respectable bank like ANZ says no to LRBA's. The banks don't mind lending people up to 95% of a property and maximise their borrowings. But they um and ah on SMSF's. Banks are very prudent in lending to SMSF and that's the bottom line. Everything else they argue about is noise to achieve their own interests not the average hard working Aussie who deserves to get ahead so they don't need to beg the government for the measly pension when they retire. Give us some dignity for God's sake.0- It is worth noting that many LRBA's are actually done by the mum and dad super fund trustee/member borrowing against therir home at home loan rates and then lending to their super fund under a properly structured LRBA. The bank's thought they would provide a "complying" loan facility and rip off the customer by dressing it up as something it isn't. At the end of the day it is just a property mortgage and the reason mum and dad are borrowing against the home and doing the LRBA themselves is because it saves 2 or more percent pa in interest plus a lot of unnecessary fees.
So guess what? ANZ are not interested.
Certainly was not the case many years ago when they were doing the finance and picking up a healthy extra margin for doing so.0 - General comments, such as those made by ANZ and others show a lack of understanding of the use of LRBAs. It does not necessarily follow that a geared property is a bad investment: in fact there are some excellent investments in my practice. The properties are conservatively geared, the funds have good cash flows and the loans are reducing very quickly.
I wish people would think before they jump in and make fools of themselves. I really wonder at the type of person who has a closed mind on all things that do not fit their business profile or their wallet: can they be independent in their thoughts and do they have the best interests at heart of their clients?0 - As an adviser who's dealt in this space for over 5 years now I must laugh as I've helped over a dozen ANZ staff members create their own SMSF for the purpose of LRBA's, and guess what? None have sourced their loan through ANZ. I might add that some of these staff members worked in the advice field or management and have achieved great results by using a LRBA. It would be great if everyone could go back to the drawing board and see why the legislation changed in 2007.0
- Are ANZ saying they do not have one LRBA facility on their books?
I cant confirm this 100% but it was my understanding that ANZ officially did not operate in the LRBA spacehowever if you were a big enough client they were prepared to look at it rather than lose the client to another bank!0 - Wholeheartedly agree with the comments made. ASFA hopelessly conflicted, self-serving and protecting its patch. Let's hope some rational commentary enters the debate. As for ANZ, they have never lent directly to SMSFs so why are they commenting?0
- The ANZ bank (that offers financial advice services) doesn't want LRBA's.
I ask why? Is it because they are losing customers to small firms who treat their clients more like family rather than just as a number or a cost/profit centre?
Is ANZ moral high-ground approach of - we won't enter into this market actually in the best interests of their cost/profit centres (or customers if you prefer) actually in the best interest of the bank or the bank's customers?
Could it be argued the bank is trying to keep market share and still offering the same old products and still treat their customers as profit centres and limit competition?
I cannot answer that as I feel the bank is operating in the best interests of their customers but my thoughts could be challenged by others in very fertile ground.0 - As expressed last week in my email to you Katarina, it is ridiculous for ANZ to comment as it doesn't even lend in the limited recourse SMSF space. I doubly confirmed this with a specialist SMSF finance broker in the last few days!!!
What is the ANZs real position? Support of industry and retail superannuation that cannot do what SMSFs can do investment wise? You really have to wonder!0 - Bank against lending! Under any circumstances apparently. The ANZ submission must surely be the silliest submission made to the FSI. IF personal guarantees banned and LVRs wound down to say 50% then LRBA lending will be far far safer than the overwhelming majority of lending ANZ does outside super. To be logically consistent ANZ will need to be against almost its entire business. Effectively ANZ advocates banning ANZ they just aren't smart enough to realise that's what they have said!0
- What a joke! The only reason they want to ban it is the "limited recourse" restriction. A SMSF can invest in any number of listed vehicles which are (or can be) geared to the highest limits and this is acceptable?0
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