Loan Market chairman Sam White believes that bank ownership of mortgage aggregation businesses has been beneficial for broking. However, he sees potential headwinds as banks deal with increasing compliance challenges.
Bank ownership of third-party businesses remains a contentious issue. However, it is commonplace and very much part of the evolution of mortgage broking in Australia. NAB’s ownership of Choice, FAST and PLAN; Macquarie’s stake in a number of aggregators; and CBA’s recent 100 per cent ownership of Aussie have been well documented.
As the banks face a tougher regulatory environment and increased scrutiny, however, Loan Market chairman Sam White believes things could change.
“Bank ownership has been positive for the industry and given confidence that it has a future,” Mr White told The Adviser.
“But I think one of the challenges moving forward for bank-owned groups is that they will be dealing with bank-owned compliance. Right now, you are seeing a very strong reaction to banks against compliance risk. What we have seen recently is a more risk-averse culture. In some cases, that’s warranted, and in some cases, it’s not.
Mr White believes that moving forward, the requirements of large, mass market financial services businesses will need to operate on a “lowest common denominator level” and that will impose “more onerous obligations” than might otherwise be the case.
“That may happen,” the chairman said. “But in terms of customer outcomes and the brokers who work in those groups, bank ownership of aggregators has not been a problem.”
The banks have faced increased pressure from regulators in recent years. Just last week, APRA revealed the terms of reference for its inquiry into CBA following the AUSTRAC money-laundering scandal.
Late last month, CBA acquired the remaining 20 per cent stake in Aussie Home Loans, Australia’s largest mortgage broker. Aussie founder and chairman John Symond received 2.1 million CBA shares, at $78.54 each, worth $164 million.
[Related: Is CBA shorting mortgage brokers?]