Day 416: 'Why wait two years?'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 416.
Today in summary: Labor politicians are throwing the phrase “in principle” around a lot, as the war of words heats up over whether they will fully implement all of Hayne’s recommendations; Graeme Samuel says the banks should push ahead with a code of conduct instead of waiting for legislation; CBA’s compliance costs blow out to A$121 million as the big four bank share price rally meets an abrupt end; and RBA Governor Philip Lowe says accountability starts at the top.
-- Charis
Current banker panic level: 😳🤕😤
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Labor politicians seem to have an ear open to blowback from the mortgage broking sector about Hayne’s recommendations on commissions. The lobby groups have been out arguing any move to see fees paid directly by borrowers instead of lenders would push interest rates up and decimate the sector. Shadow Minister for Financial Services Clare O’Neil told the ABC the opposition has accepted that recommendation “in principle” and intended to implement it, but then went on to clarify that didn’t mean they would do it immediately.
“The only reason that I use that language, Raf, is because you make a good point that there are a lot of mortgages originating in mortgage brokers at the moment and we do need to fully understand what the implications of such a change would be and how it would best be managed. It’s not something that a responsible political party just picks up and says ‘yes, we’re going to do this immediately, as quickly as possible’. The mortgage brokers in Australia actually play a really important role. So we agree with the recommendation, we accept it, but we accept in principle because we need to understand what the full implications of this are.
Meanwhile, Graeme Samuel, who has been tasked with undertaking the capability review of APRA, says banks needn’t wait for legislation to take action. He’s calling on the banks to sign a new code of conduct, promising to run their businesses in line with Hayne’s recommendations.
“Why wait up to two years for changes when they can do it today?”
The Commonwealth Bank’s A$4.68 billion profit was overshadowed by a blowout in risk, compliance and remediation costs to A$121 million, as it fixes its problematic financial crimes and anti-money laundering detection processes. CEO Matt Comyn said risk and compliance spending now made up about two thirds of investment spending, money that would normally have been spent on productivity and growth initiatives. After yesterday’s rally, shares of the big four banks were down today, with CBA closing 1.26% lower.
Reserve Bank Governor Philip Lowe has weighed in on the Hayne Royal Commission, welcoming the focus on the importance of service over sales, and accountability when things go wrong. After his address to the National Press Club he told the audience bank leaders should take responsibility for the culture of the organisations they lead, though he wouldn’t be drawn on whether NAB leaders Ken Henry and Andrew Thorburn should step aside.
“Cultural change really starts at the top in organisations. Leaders in organisations really need to be focused on delivering the right culture. It’s something that at the Reserve Bank we talk about. There has to be accountability and it starts at the top.”
Today’s burn prize: Consumer Action Law Centre policy director Katherine Temple
🔥🔥🔥
“The commission final report called out these kinds of scare tactics and predicted the industry would start claiming that the reform would result in ‘unintended consequences’, so he accurately predicted the response — it’s quite uncanny really.”
Consumer groups are unconvinced by the arguments from mortgage brokers
The Commentariat
The reaction to the Hayne royal commission that suggests the major banks got off lightly is narrow and distorted, writes Stephen Bartholomeusz in the Sydney Morning Herald.
“There’s been a massive impact from the entire process leading up to the final report and there are aspects of the report, ranging from the potential abolition of mortgage broker commissions to the removal of exemptions and carve-outs from financial services laws - that will continue to reshape the sector.”
Commissioner Hayne’s recommendations on commissions in the financial advice sector have thrown the big banks’ plans to sell off their wealth management arms into disarray writes the AFR’s Karen Maley.
“Hayne's recommendations diminish the attractiveness of the financial advice firms, complicating the task the banks face as they try to extricate themselves from these businesses.”
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