Powered by MOMENTUM MEDIA
subscribe to our newsletter

‘Significant opportunity’ for self-regulatory response to remuneration

There is a "significant opportunity for the mortgage industry, in consultation with government... to develop a self-regulatory response to change payments in mortgage broking", according to the latest progress report into the ABA’s reform programme.

Former auditor-general Mr Ian McPhee AO PSM, released his fifth progress report yesterday into the Australian Bankers’ Association’s (ABA) package of six initiatives to “better protect consumer interests, increase transparency and accountability, and build trust and confidence in banks.”

Announced in April 2016, the reforms include:

- Reviewing product sales commissions and product-based payments to “strengthen the alignment of remuneration and incentives and customer outcomes”;
- Making it easier for customers when things go wrong and “ensure retail and small business customers have a voice and problems are resolved more efficiently (and responded to within specified timeframes);
 - Reaffirming support for employees who ‘blow the whistle’ on inappropriate conduct;
 - Removing individuals from the industry for poor conduct and implement an industry register or other mechanism to identify poor conduct across all bank employees;
 - Strengthening the commitment to customers in the Code of Banking Practice; and
 - Supporting ASIC as a strong regulator.

The latest progress report into the ABA’s reform programme states that the changes are “starting to gain traction” but that industry “still need[s] to see more rubber on the road”.

Self-regulatory response to change mortgage broking remuneration

Advertisement
Advertisement

Touching on the first initiative into remuneration, Mr McPhee noted that the Mortgage Industry Forum had been established to “discuss the potential impacts of both the [Sedgwick] Review and ASIC’s review of mortgage broker remuneration” and had met twice. 

He writes: “A second meeting of the Forum was held on 18 July 2017, which allowed the mortgage industry to continue to identify appropriate strategies for progressing changes to payments and governance arrangements. 

“The ABA has advised it believes this Forum will be an important vehicle for the mortgage industry to work together on these reforms and in consultation with regulators.” 

Mr McPhee added that the ABA notes that “both [the] representatives from mortgage brokers and the Finance Sector Union have an expectation that any reforms will happen on an aligned basis across the industry, suggesting that further consultation will be required before positions can be settled”.

He emphasised that ABA’s response to Treasury regarding ASIC’s review of mortgage broker remuneration suggested that there was “a significant opportunity for the mortgage industry, in consultation with government and subject to any necessary regulatory approvals, to develop a self-regulatory response to change payments and governance arrangements in mortgage broking that will manage risks to consumers and promote better consumer outcomes”.

PROMOTED CONTENT


Mr McPhee continued: “Based on advice from participant banks, there are a range of views on the merits of the industry proceeding with the development of guiding principles on remuneration, given the recommendations of the Sedgwick Review, the work by individual banks to develop their own remuneration principles and the review being undertaken by APRA which is expected to give consideration to remuneration principles applying to the industry.

“Given the significance of this issue and the profile which remuneration has for the industry, it is clearly desirable for the industry to settle its position in relation to this matter and reflect it as appropriate in the ABA’s implementation plan. 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.” 

In conclusion, Mr McPhee wrote that the reform program is "well advanced" with many initiatives having moved from design to implementation phases, but added that "while there is still work to be done to complete some of the measures, the focus going forward will increasingly be on the efforts of individual banks to embed the reform measures to the extent required to deliver on the goals of the six industry initiatives". 

The ABA has welcomed the report, with its executive director of retail policy, Diane Tate, saying: “If the industry’s reform program is to be successful, bank customers must be able to experience improvements themselves… 

“It is important that the industry increases awareness with customers and the broader community about how they will benefit from the improvements banks are making, and also that we’re able to measure success effectively,” she said. 

She added: “It is encouraging that we’re seeing early signs of customers benefiting from these changes, but banks realise there is much more work to be done.”

Mr McPhee’s next report is expected by 21 October 2017.

[Related: Banks commit to further industry reforms]

 

‘Significant opportunity’ for self-regulatory response to remuneration
mortgagebusiness

Are you a new-to-industry broker in the process of growing your business? Then there’s some great news: The Adviser’s New Broker Academy is back in 2021 and will provide you with essential insights into cutting-edge tools, strategies and processes to fast-track to success. Don’t miss your chance to attend. To secure your FREE place, visit newbroker.com.au now!

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

The chief of Australia’s largest bank has said lenders should act pre-emptively and shift their floor rates for mortgage serviceability am...

Total household wealth reached a high of $13.4 trillion in the June quarter, primarily due to rising property prices, according to the Aust...

The property exchange settlement platform has been granted approval to establish an Electronic Lodgement Network in the ACT.  ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.