The crisis of coronavirus had created a major negative impact upon the banking operations in the territory of Australia. This is the reason why the major banks in Australia have taken various measures and formulated diverse strategies to combat the issues as more customers are seeking support from banking operations. It must be understood that various banking corporations in the territory of Australia are solely responsible for providing loan guarantees as well as other subsidies to the customers to protect the borrowers while maintaining a smooth credit flow in Australia.
Therefore to combat the issue and risk associated with the current pandemic of COVID-19, banks are working hard to forecast the potential losses the banks may likely incur. The present essay will focus on the impacts of COVID-19 upon the Westpac banking corporation. The essay will analyze the impact of the pandemic upon its staff, balance sheet, and the revenue of the bank ranging from the short term to the medium period. The disclosure obligations and announcements imposed by ASX will also be determined and analyzed in the present essay.
It must be noted that the impact of COVID-19 had severely created a drastic change in various strategies and policies of Westpac banking corporation in regards of its maintenance of balance sheet, revenue as well as the staff level of the financial institution1. The impact is not only restricted to a shorter duration but it will range up to a medium-term. It is not only the financial institutions in the territory of Australia which had been impacted by the pandemic but the impact can be also seen upon the daily lives of the customers in the country2. It is important to know that the government of Australia had formulated certain policies like social distancing and restriction in the supply chain of various enterprises ranging from small to medium size.
These new formulations of policies by the government had also impacted the financial institutions like Westpac banking corporation as it is the banks who are affected due to the economic crisis arose from the COVID-19 situation.
It must be noted that the Westpac banking corporation had sought to suppose from the Government of Australia for protecting the customers ranging from different size enterprises to maintain a flow of credit in the territory of Australia. During the pandemic of COVID-19, various major banks have started providing diverse unsecured loans to different business organizations ranging from 250 dollars, and only half of the amount is been guaranteed by the Australian government which is a matter of risk to the revenue of the financial institution. Apart from this the revenue of respect banking corporations had also been affected due to its exemption of paying back the loan by various customers for 6 months to help them to cope up with the crisis of coronavirus.
It is important to know that the Australian government had also asked the financial institutions to provide subsidies for 1500 dollars 4 night to all the employees for 6 months and had advised the financial institutions to reduce the tax rates. These pieces of evidence are enough to show the instant impact on the revenue of Westpac banking corporation due to the crisis of COVID-193. The fact is undeniable that the imbalance in the revenue will also create an impact upon the balance sheet of the financial institutions. It must be noted that Westpac banking corporation have started implementing diverse relief schemes other than providing repayment initiatives and exemptions to the customers.
All the exemptions and policies formulated by the government the financial institutions have created a major pressure upon various financial institutions in Australia. Therefore it has become out of the task to maintain a balance of revenue and balance sheet during the crisis of coronavirus. Also so every banking corporation maintains there balance sheet by recording the data of the revenue generated and the creditors. However during the current situation of COVID-19 the balance sheet it is not the same as before because of protecting the borrowers from the problem of liquidity. According to the Corporations Act 2001, and various other regulations and legislations the borrowers are categorized into three groups.
The first category of followers pays the financial institutions all the installment of the loan according to their signed agreements4. While on the other hand some borrowers are supported by the schemes made by the government and the last category of people are under no whatsoever forbearance agreement with the financial institution. The Westpac banking corporation has come up with various efforts to protect the third group of borrowers by implementing various interventions from the end of the government as well as the banks.
The Australian economy is getting drastically affected due to the pandemic of coronavirus and this had made various categories and groups of borrowers to migrate from one category to another. It is important to note that most of the borrowers are willing to come under the third category of borrowers. This had formulated a remarkable challenge upon the shoulders of the financial institutions to carry the potential future losses in regards to the uncertainty of repayment from the borrowers to the banks. All the stated reasons had restricted the fundamental cash flow of the financial institutions and had restricted the banks to maintain their financial ratios.
It must be noted that the management of the internal system of the Westpac banking corporation is maintained by its CEO, Mr. King who had been trying to maintain a balance between the short term as well as the medium-term of maintaining the balance sheet of the financial institution. Westpac banking corporation head formulated a strategic committee to maintain the compliance of various credit policies is formulated by the bank to mitigate the upcoming future operational risks. It is important to note that Mac Farlane, had announced various policies and regulations for the staff and employees of the west banking corporations so that they can cope up internally with the pandemic.
Cooperating with the employees and staff of the financial institution will not only help the employees at the management level but this is directly proportional to the services provided to the customers during the crisis. 3.0 % decrease has been reported in the revenue of Westpac Banking Corporation along with the 42.6 percent decrease in the total cash profit. Apart from this, the financial institutions had also reported a decrease of 5.6 % of its average equity during the prices of coronavirus6. All these data are enough to report the impact of COVID-19 upon the operations of the banking system in Australia.
To cope up and maintain a face with the current pandemic, the Westpac banking corporation had initiated a scheme of encouraging more services upon a digital base so that the policies like social distancing can also be maintained without jeopardizing the interest of the borrowers and customers of the country. Creating more digital-based services and protected the jobless and the threat of unemployment by the end of the Westpac banking corporation. The Reserve Bank of Australia had formulated a policy where it had reduced the cash rates by 5% which will be implemented under the monetary policy by other banks. For the short term period, Westpac banking corporation had focused upon recovering the borrowers and operate for the next stage of the Australian economy.
To maintain a balance and restricting the impact of COVID-19 for medium-term the Westpac banking corporation will use the data from the present situation in the form of a catalyst so that the changes can be made accordingly7. It must be noticed that Westpac had also provided a diverse arrangement for the employees of the financial institution to work in the odd times to minimize the impact of the current situation by maintaining the regulations of the government. These strategies and policies of the financial institution will help the employees to remotely work for the customers without compromising with the quality. This is making the financial institution struggle to maintain a balance of its balance sheet as the financial institution is letting more than 85% of its total employees to work from their home.
It must be noted that Westpac had arranged 3 lakh hour video and audio conference in March and had also provided a different credit card of opportunity with zero-interest for 3 months. For a shorter duration the bank had fixed the rates of loan for certain borrowers up to 3 years. Apart from this at only a 2.0% rate of interest, Westpac banking corporation head provides fixed loan rates of more than 10 billion dollars that can be accessed by the borrowers. Therefore it can be concluded that the current situation of coronavirus had majorly impacted the working of employees, the revenue, and the balance sheet of Westpac banking corporation.
The ASX had formulated certain disclosure policies that must be abided by all the organizations operating in the territory of Australia. The market disclosure policies must be adhered to by the financial institutions. This is the reason why Westpac banking Corporation is ensuring the policies of disclosure by ASX. According to the ASX listing rules guidelines note 8, it must be noted that only a partial or a limited amount of information must be disclosed according to an ordinary reasoning ability of a person. According to the disclosure policy, only that information must be disclosed which can have a material effect over the price of the securities issued by any organization. Westpac banking corporation has complied with the disclosure obligations of the ASX8.
All the relevant and material alterations in the performance related to the financial year have been disclosed according to the provisions laid down under ASX listing rules 3.1, as well as the exceptions provided under 3.1A. The Westpac banking corporation is obligated towards the disclosure policies in such a way that it has to disclose all the relevant information related to the finance of the entity which may likely create a material effect upon the securities of the financial institution. Any alterations made independence of the board of directors of the financial institutions are the executives must also be reported under the disclosure policy of ASX.
It must be noted that any newly formed recommendations or declarations associated with the dividend or distribution of the entity which may not likely to be paid must also be informed to the authorities according to the disclosure policies and listing rules 3.1A9. There are various numbers of securities that are listed and associated with the entity and it must be noted that any changes in the same must also be reported to the ASX according to the policies laid under it. Any such changes related to the market speculations for accounting policies need to be disclosed under the disclosure policies 3.1.
It must be noted that as per the ASX listing rules 3.1, 3.1A and 3.1B and according to ASX listing rules guidance note 8, it is necessary that the entity after getting aware regarding any information which can potentially hold a material impact upon the values of the securities or any other material change associated with the entity or the organization must be disclosed. Section 677 of the corporations' act 2001, reflects light upon the application of such disclosure by the entities10. According to section 675 and 674, the disclosure must be made according to the students of a reasonable person under which the analysis of relevant information regarding its material effect upon the value can be categorized11.
According to listed rule 3.1B, it is important that the inclusion of all the relevant and material information must be made to restrict the false market in the territory of Australia. However it must be noted that the confidential agreement of the entity restricts the disclosure of information according to the disclosure obligations guidance note 8. According to the disclosure obligations, only a certain amount and category of information can be disclosed to ASX. Therefore according to the listing rule 3.1 of ASX, the entire panel of the board of directors must not approve for all the announcements made under the rule due to the exception provided under 3.1A.
Only a particular category of material information can be revealed by the entities subject to the approval of the panel of board of directors according to the exception provided. The disclosure must be made only for the significant change in the activities and operations of the activity. For example if the entity had made any discovery related to any mineral or material acquisition or any termination of a relevant agreement, only these kinds of significant changes must be reported to the ASX. Any other confidential information of the entity which may likely to hamper the operations of the business must not be disclosed according to the exceptions provided under listing rule 3.112. Various grounds have been provided under the disclosure which must be made to ASX and thereby these grounds are imposed upon the disclosure obligations of the entity. If any organization or entity is likely to be subjected under any legal suit can be reported under the disclosure obligations.
However any other disclosure which is associated with the internal management of the entity or any material irrelevant information associated with the trade secret of the entity must strictly not be disclosed according to exception 3.1A. The grounds of disclosure cover any breach of law committed by the entity any other information regarding the negotiations of the entity with any other organization can be disclosed but such categorization of disclosure must be approved by the panel of board of directors first hand.
It is upon the discretion of the board of directors to restrict the disclosure if the same is not approved according to the ground provided by the ASX listing rules 3.1. Various Court rulings have opened the significance of disclosure obligations of the entity which needs to be met to comply with the regulations of disclosure by ASX13. However again the disclosure must be subjected to the exceptions provided and the listing rule 3.1A. Therefore on the grounds of the exceptions it can be inferred that the board of directors may not approve the entire announcement made under listing rule 3.114.
It must be noted that certain announcements are listed under 3.1 of the disclosure obligations to ASX. It is important to understand that such an announcement must be issued on an immediate basis under the responsibility of the board of directors of the entity to make relevant arrangements for imparting the information related to the announcements of the significant material change in the operations of the entity15. Proper approval from the board of directors is a must before any release of announcement subjected to the exceptions. Therefore it can be said that because of the current pandemic of coronavirus, various institutions are suffering from major economic losses in Australia and this is the reason why the disclosure obligations have become more relevant to update the government regarding any material change of the entities.
It is important to note that the disclosure can help the government to make better policies to protect the lives of people in Australia. Westpac banking corporation has to abide by all the disclosure obligations laid under listing rule 3.1 of ASX. Any change regarding the value of the share of the financial institution or any change in the decrease of market cap has to be shared according to the category of the group provided under listing rules 3.116. All the financial changes in the operations of Westpac banking corporations are likely to have a material effect upon the change in the value of securities and shares of the entity and therefore the same must be disclosed.
According to the corporation's act 2001, under various sections of 674, 675, 677, and 678, the financial institution has to provide information to the ASX regarding any relevant change in the interest rate so that the same can be communicated with the borrowers17. Also any material change regarding the agreements of Westpac must be disclosed keeping in mind the expectations of the market.
Therefore in the lights of the present facts and circumstances of Westpac Banking Corporation, it can be inferred that the current situation of coronavirus had created a dramatic negative impact upon the revenue, balance sheet as well as staff management of the financial institution. However on the other hand it can also be seen that Westpac Banking Corporation is struggling hard to maintain the operations of the entity by ensuring all the disclosure obligations under listing rules 3.1 as well as the exceptions provided under listing rules 3.1A.
21. 05. 2020
To the Manager,
Australian Securities Exchange,
Level 2/10 Bridge Street
New South Wales 2000,
Subject – Regarding announcement for change in the financial operations of the Westpac Banking Corporations.
This is to inform the announcement officer of the Australian security exchange, regarding the material change in the revenue and balance sheet of Westpac banking corporation. Moreover, an amount of $50 million shares will be allocated to provide to the small enterprises to cope up with the current situation of COVID-19. Apart from this $30 million of funds will be provided at an interest rate of 1.10% to the borrowers by raising the equity shares of the entity by 3.2 million dollars. All these changes have been made to provide a buffer in the repayment of loans by the borrowers. Also, the funding of capital will be placed under keeping certain factors into consideration like the operational activities of Westpac banking corporations and all the additional working capital. We believe that the west park banking corporation is likely to issue the shares in the market in the expected next three weeks. This is to inform you that these announcements have been made under the authority of the CEO of Westpac banking corporation.
For any other inquiries, you may contact.
Mr. Peter King
(CEO of Westpac Banking Corporation)
ASIC v Hellicar (2012) HCA 17
ASIC v Macdonald (No. 11) (2009) NSWSC 287
Forrest v ASIC (2012) HCA 39
Morley v ASIC (2010) NSWCA 331
Guidance Note 8, Disclosure obligations.
Listing Rule 3.1 and section 674
Listing rule 3.1, 3.1 A
Section 674, 675, 677, 678 of the Corporations Act 2001
IBS Intelligence, Australia’s Westpac bank cautions against COVID-19 scams, assures security guarantee (2020), (Web Page) <https://ibsintelligence.com/ibs-journal/ibs-news/australias-westpac-bank-cautions-against-covid-19-scams-assures-security-guarantee/>
Keating, Byron & Quazi, Ali & Kriz, Anton & Coltman, Tim. In pursuit of a sustainable supply chain: Insights from Westpac Banking Corporation. Faculty of Informatics. (2008), 56-78
Main, A. Contagion: taking coronavirus’s economic temperature. (2020).(Web Page) <https://www.westpac.com.au/news/in-depth/2020/01/contagion-taking-coronaviruss-economic-temperature/>
Schiebel, W. and Pochtrager, S. “Corporate ethics as a factor for success: the measurement instrument of the University of Agricultural Sciences”, Supply Chain Management, (2003), 8(2), An International Journal, 116-21.
Svensson, G. “Aspects of sustainable supply chain management: conceptual framework and empirical example”, Supply Chain Management, (2007), 12(4), An International Journal, 262-66
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