From Mortgage Professional Australia.
The latest update on bank reform has revealed the slow and varying progress made by banks in changing broker commissions.
Ian McPhee’s report, commissioned by, but independent of the Australian Bankers Association, asked banks how far they had implemented the Sedgwick Review’s recommendations. Stephen Sedgwick called for an end to volume-based incentives and for banks to ensure remuneration was not directly linked to loan size.
Macquarie Bank, My State Bank, and Bank Australia were amongst the furthest ahead banks, with ‘substantial alignment’ of their broker remuneration to Sedgwick’s recommendation. Only Qudos Bank was fully aligned with the recommendations.
Conversely, Commonwealth Bank’s broker remuneration and governance arrangements were ‘not aligned – planning and/or some implementation progressed’. Work on reforming remuneration had not started at Bank of Queensland, and work reforming governance had not begun at Bank of Sydney.
Of the other majors, ANZ, NAB, and Westpac reported partial implementation of Sedgwick’s reforms.
An imperfect scorecard
McPhee himself notes that “it is not appropriate to draw early conclusions on the status of individual banks’ implementation programs.”
For a start, banks self-reported their own progress with minimal oversight from McPhee. Furthermore, banks’ reporting cycles vary; a bank that reports at the end of the financial year may appear further advanced than a bank that reports at the end of the calendar year, for instance.
According to McPhee “the Sedgwick Review recommendations relating to banks’ arrangements with third parties are least progressed, with a number of banks reporting that they are still in the planning phases. This reflects the time taken to establish the Combined Industry Forum and agree industry-wide responses.”
The Combined Industry Forum set out its changes to remuneration in December.
