Australia’s Beleaguered Banks Get a Break Following Landmark Inquiry

The last year or so has been trying times for Australia’s biggest banks, who were beset with scandals and the recommendations of the government-appointed inquiry have further tarnished their reputations. However, at the same time, it needs to be kept in mind that it is an opportunity for Australian banks to get their houses in order and initiate a rebuild.

Some of the allegations included charging nonexistent fees, selling complex products to vulnerable people and other misdemeanors. The big development from the Royal Commission recommendations were the reforms that were supposed to kick in, in the mortgage broking sector.

According to the changes proposed by the commission, the brokerage fee is now supposed to be paid by the customers and not the lenders. If that happens, then the top Australian banks can boost margins by completely cutting out brokers. Mortgage generates the highest percentage of profits for banks, and once the mortgage brokers are taken out of the equation, then there are potentially billions of extra dollars for the banks to play with. A brokerage estimated that the new measure could lower the volume of loans going through mortgage brokers by 15%. A bank official, who spoke on the condition of anonymity, said, “With their huge customer base and mortgage books, the large incumbent banks are very well positioned to benefit from a post-Royal Commission world where they can win (market share).”

It opens up a real window of opportunity for four of the largest banks in Australia’s oligopolistic banking system- Westpac Banking Corp, Commonwealth Bank of Australia, Australia and New Zealand Banking Corp and National Australia Bank. According to those in the know, the possibility of generating billions in extra revenues could also be used by the banks to open up new branches, and the speculation is that those branches will be opened up in areas with high growth potential. Needless to say, this will eventually help the banks in drawing in more customers.

On the other hand, the banks which built up their own mortgage loan network could enjoy a significant advantage over rivals who depended on mortgage brokers. Among the biggest Australian banks, Commonwealth Bank of Australia and Westpac Banking Corp will definitely enjoy this advantage. Both those banks have built up big networks of branches that will help them in selling mortgage loans directly. As it has now become abundantly clear, the largest banks in Australia could now emerge stronger than ever if the recommendations are enforced by the parliament.

Donald Greenough
About author

Donald Greenough has spent almost a decade in covering latest news articles about finance industry. He holds master's degree in journalism and working as a senior news editor at FinanceBottom. He regularly contributes trending news updates related to business world.
Related posts

Despite Brexit Chaos, London Remains the World’s Biggest Financial Hub


Brazilian Medical Watchdog, ANVISA, has Approved Growing of Cannabis Sativa for Medical Purposes


The US and UK Governments Signed the First Data Access Agreement Under the CLOUD Act


Trump Says Talks Too Slow: Threatens China With Tariff Hikes

Leave a Reply

Your email address will not be published. Required fields are marked *