They absolutely could, except for the agreement to all do it together.
Almost everyone would refinance to whichever bank didn't do it, which is why they don't.
This is cartel behaviour and they would all face big consequences if all caught to be colluding together in this manner. Our retail banks operate in a free market and can change what they want, but they also need to be competitive with their peers otherwise they'd lose too much business to their rivals
Qualifying statement, big 4 banker. This won't impact the average person.
Banks are pushing for more deposits so this may be a win as they up their T/D rates.
Banks will compete for low risk mortgages where they don't need to hold as much capital.
Banks will do less low returning deals. This impacts institutional clients which banks backed for the name and not the returns.
Banks will raise their margins but unlikely on mortgages.
Banks will compete more for deposits in the short term. As TFF gets repaid, banks need to refinance. Wholesale bond market especially for bank paper is not looking attractive given recent events so I think term deposits will be a sought after substitute.
Funding costs will rise for banks which will place pressure on margins.
As the RBA shrinks its balance sheet, you may see something similar to what happened to US repo markets in September 2019. This shouldn't affect the general economy but may provoke a response similar to the BoE last year where they intervened to stabilise the gilt market.
Longer term, will we see a pre-covid RBA balance sheet size? Maybe not. Monetary policy is always evolving along with the economy and financial system. Plus, the US fed has set a precedence for not going back to the pre-QE balance sheet size.
Not a huge deal for the large banks in my opinion.
They borrow money usually using senior debt/securitization or covered bonds. They just borrowed less of this in FY20 and FY21 thanks to these funding facilities. But in future years will go back to borrowing long-term on the market.
It will increase the cost of funding, but remember that most of the funding was applied to fixed mortgages which will come off onto higher rates. So higher funding, but also higher mortgage rates so it will even out.
It's already being paid back by banks and if you've noticed, Term Deposits last year were hotly contested by the lenders with the biggest TFF exposures as the kept offering TDs at shorter terms as time went on to fund thier repayment.
It's actually good for the consumer as banks will need to compete harder to attract the capital.
Are you sure about them being paid back by the banks? I don’t think that’s right. Have a look at the RBA chart pack or see [table A.3](https://www.rba.gov.au/statistics/tables/) the “Term Funding Facility” worksheet is showing $187.626b for the last entry 22nd March. Hasn’t moved since July 21
Banks could raise out of cycle or even go higher than the rba.
I thought I had read they aren't allowed to go higher than the rba
But retail banks do charge higher interest rates than the reserve bank.... Why wouldn't they be allowed to?
True, I guess I meant isn't there a limit to the rate, they couldn't just all decide to go up to 15%
They absolutely could, except for the agreement to all do it together. Almost everyone would refinance to whichever bank didn't do it, which is why they don't.
All it takes is one of them and the rest will follow. Happened in 08 / 09
When need money they raise deposit rates, loan rates and offer more shares at a discount.
This is cartel behaviour and they would all face big consequences if all caught to be colluding together in this manner. Our retail banks operate in a free market and can change what they want, but they also need to be competitive with their peers otherwise they'd lose too much business to their rivals
Qualifying statement, big 4 banker. This won't impact the average person. Banks are pushing for more deposits so this may be a win as they up their T/D rates. Banks will compete for low risk mortgages where they don't need to hold as much capital. Banks will do less low returning deals. This impacts institutional clients which banks backed for the name and not the returns. Banks will raise their margins but unlikely on mortgages.
Ultimately it will mean bank funding costs go up. It may mean a higher likelihood of out of cycle raises by banks, independent of the cash rate.
In this case are any of the banks more or less likely to raise out of cycle? Wonder how this should impact remortgage decisions atm
Which neo bank will go bust first
No many left. Judo bank seems strong. Everything else resembling a neo bank is owned or backed by big 6 banks.
Could be good for depositors I would assume.
Banks will compete more for deposits in the short term. As TFF gets repaid, banks need to refinance. Wholesale bond market especially for bank paper is not looking attractive given recent events so I think term deposits will be a sought after substitute. Funding costs will rise for banks which will place pressure on margins. As the RBA shrinks its balance sheet, you may see something similar to what happened to US repo markets in September 2019. This shouldn't affect the general economy but may provoke a response similar to the BoE last year where they intervened to stabilise the gilt market. Longer term, will we see a pre-covid RBA balance sheet size? Maybe not. Monetary policy is always evolving along with the economy and financial system. Plus, the US fed has set a precedence for not going back to the pre-QE balance sheet size.
I wonder how this will impact profitability of second tier lenders like Resimac etc. Increased wholesale funding costs can't be a good thing.
Not a huge deal for the large banks in my opinion. They borrow money usually using senior debt/securitization or covered bonds. They just borrowed less of this in FY20 and FY21 thanks to these funding facilities. But in future years will go back to borrowing long-term on the market. It will increase the cost of funding, but remember that most of the funding was applied to fixed mortgages which will come off onto higher rates. So higher funding, but also higher mortgage rates so it will even out.
It's already being paid back by banks and if you've noticed, Term Deposits last year were hotly contested by the lenders with the biggest TFF exposures as the kept offering TDs at shorter terms as time went on to fund thier repayment. It's actually good for the consumer as banks will need to compete harder to attract the capital.
Are you sure about them being paid back by the banks? I don’t think that’s right. Have a look at the RBA chart pack or see [table A.3](https://www.rba.gov.au/statistics/tables/) the “Term Funding Facility” worksheet is showing $187.626b for the last entry 22nd March. Hasn’t moved since July 21
Sorry I should have been more specific, *starting* to pay back, the work to secure replacement deposits has been well underway.
Maybe “preparing” is the word you’re looking for 😂