From Mortgage Professional Australia.
ANZ CEO’s comments suggest proposals for changing broker commissions have become a thorn in the banks’ side.
Commission changes proposed by the Sedgwick Review have been thrown into doubt, after the CEO of ANZ and soon-to-be chairman of the Australian Bankers Association admitted more work needed to be done to implement them.
Shayne Elliot, speaking to the House of Representatives, “we’re going to implement all that we can. The one that’s clearly the most complicated is around fair paid brokers and the only reason there is it’s hard for us to do that unilaterally… We agree with the intent, we’ve just got to work that through.”
Prompted to explain his approach, Elliot argued that “if we do it alone what will happen is we’ll be out of business”. He explained that the banks were working with the ABA and brokers. Deputy CEO Graham Hodges added that “the devil’s in the detail because clearly, it’s going to affect thousands of brokers.”
Elliot’s comments are particularly relevant after it was announced yesterday become will be the next chairman of the ABA, starting in December. The ABA originally sponsored the Sedgwick Review as part of a package of measure to improve consumer trust in banks.
Sedgwick in detail
Stephen Sedgwick’s proposals are hugely unpopular with many brokers. They include decoupling commissions from loan size, thus going further then ASIC’s suggestion to avoid pushing consumers to get bigger loans.
On publication of the Review, all of the banks agreed to implement its proposals by 2020. However, bank submissions to the Treasury, following ASIC’s separate review, show how divided the banks’ are on the broker commission proposals.
Westpac warned that “a flat fee commission structure could prompt an increase in split banking as brokers seek to maximise income by submitting smaller deals”, arguing that any commission change would increase costs for the industry.
Alongside NAB and CBA, Westpac reiterated the importance of working with the industry to develop commission changes. ANZ declined to make their report public.
Proposals to sink or swim by November
With the Combined Industry Forum planning to recommend commission changes to the Government as soon as November, the deadline is looming for banks to change their approach.
Ian McPhee, who is tasked with assessing the banks’ progress implementing the Sedgwick Review, provided a roadmap for a potential U-turn in a report in July.
Acknowleding the banks had a range of views on commissions, McPhee wrote that “should the industry decide not proceed with the guiding principles then a clear basis for the decision should be articulated, consistent with the approach for previous variations to the implementation plan.”
