Day 450: 'Make sure you follow all the rules’
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 450.
Today in summary: Stephen Sedgwick has urged banks to shift toward a fee-for-service model for mortgage broker remuneration; ASIC wants six of Australia’s biggest financial institutions to stop “unreasonably” delaying investigations into their fees-for-no-service rorts; and NAB is ramping up its repayment scheme, doling out A$110 million to 310,000 customers over the past six months.
-- Alex
@AlexESampson
Current banker panic level: 🤑🤐🤑
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1. In his latest review of financial sector remuneration, released today, Stephen Sedgwick has urged banks to shift toward a fee-for-service model for mortgage broker remuneration and away from the current controversial commissions approach. Sedgwick urged lenders to rethink their remuneration of brokers, while also acknowledging that restructuring broker pay was complex and had become a "hotly-contested" issue.
“Market dynamics (and significant reluctance in some quarters to acknowledge the residual risk) have meant that a viable alternative to the standard commission model has not emerged. Desirable reform seems unlikely without regulatory change.”
This comes as Treasurer Josh Frydenberg this afternoon walked away from his plan to ban mortgage broker trailing commissions saying the government wanted to maintain competition in the mortgage lending market. The issue would instead be delayed for review in 2022, if the Coalition remains in power.
Aussie Home Loans chief executive James Symond said:
“We believe the current commission structure provides the right outcome for our customers, while preserving competition in home lending and our thriving mortgage broking industry.”
2. The corporate watchdog is fed up with six of Australia’s biggest financial institutions for “unreasonably” delaying investigations into fees-for-no-service rorts. ASIC yesterday blasted ANZ, CBA, NAB, Westpac, AMP, and Macquarie for their lack of action and warned the regulator would use new powers given by the government to compel banks to put proper compensation programs in place.
ASIC commissioner Danielle Press said:
“We believe the institutions have failed to sufficiently prioritise and resource their reviews, particularly as ASIC advised them to commence the reviews in mid-2015 or early 2016.”
Poor record-keeping and systems, failure to propose reasonable customer-centric ways to identify and compensate customers and a legalistic approach to determining the services institutions were required to provide were blamed for the delays.
3. NAB interim chief and incoming chairman Philip Chronican has announced the bank is accelerating its customer repayment program, revealing payments to an additional 310,000 customers over the past six months worth A$110 million. Chronican said the enormity of the task restoring NAB’s reputation in the wake of the banking royal commission was “no lost on” him.
In a letter to shareholders Chronican said:
“The royal commission is right. There is a big gap between where we are today and where we need to be."
Today’s burn prize: Public Service Commissioner Stephen Sedgwick AO
🔥🔥🔥
“Their authority may have been diminished in recent times, but their responsibility has not.”
In his review of finance sector remuneration, released today, Sedgwick argues that bank culture must be created and enforced by financial institutions themselves, not regulators.
The Commentariat
Australian Financial Review economic policy reporter John Kehoe writes that the banking royal commission is having negative effects on home lending, with a credit squeeze on the economy to persist, according to one of the country's most senior bankers (speaking anonymously).
“There remains uncertainty about how ASIC will apply the responsible lending laws, despite the corporate cop last month issuing new prescriptive lending guidance on how to calculate living expenses for would-be borrowers. Compounding the nervousness, ASIC's top enforcer, Daniel Crennan QC, is threatening to prosecute bankers – civilly and criminally – and lock them behind bars.”
Quantum Financial principal Tim Mackay writes in the Australian Financial Review that the Australian Taxation Office recently announced it has a self managed super fund top 100, where the 100 SMSFs with the largest asset balances are listed.
“Combined, these 100 funds control more than A$7.9 billion. That's an average fund balance of $79 million each, an impressive sum; and they control 1 per cent of all SMSF funds of A$755 billion. If you're on the list, congratulations, you're set for a luxurious retirement. However, your SMSF is now firmly on the ATO's radar so be careful; make sure you follow all the rules.”
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