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Bank chief calls for greater transparency in broking

by James Mitchell5 minute read

The head of one of Australia's leading banks has flagged bank ownership of mortgage brokers as an area that requires greater transparency.

Speaking on a panel at the AFR Banking & Wealth Summit this week, Suncorp CEO John Nesbitt called out a number of competitive distortions in the Australian mortgage market.

Mr Nesbitt argued that Australian lenders currently operate on an “uneven playing field” that needs to be “evened out”.

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“Particularly around the risk weights, around funding benefits that flow to the majors and also around regulation and transparency around [mortgage] broking,” he said.

“Many brokers today are predominantly owned by the majors and there should be transparency there.”

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Financial System Inquiry (FSI) chair David Murray was also on the panel but did not comment on the issue.

Last year, Mr Murray’s interim report found that vertical integration may have the potential to distort the way in which mortgage brokers direct borrowers to lenders.

While the report conceded that it remains unclear whether the majors are abusing their power, it did note that the Australian Competition and Consumer Commission “has taken relatively little action against the major banks in recent years”.

Smaller banks have consistently called for greater transparency of bank-owned broker groups.

In its second submission to the Murray Inquiry, the Customer Owned Banking Association argued that borrowers need to understand whether a mortgage broker is genuinely independent, whether the broker is offering products from a narrow or broad range of lenders, and whether some lenders are ‘preferred’ by the broker.

[Related: Consumers in the dark about who they're really banking with]

Bank chief calls for greater transparency in broking
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James Mitchell

James Mitchell

AUTHOR

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

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