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Banks’ commission change causes industry chaos.
ASIC, MFAA and FBAA issue hurried responses to banks’ move away from percentage-based commission

Industry associations have reacted to a decision by several banks to move away from percentage based commissions. ANZ, CBA, NAB and Westpac have promised by 2020 to fully implement the recommendations of the Sedgwick Review, introducing broker remuneration which is not linked directly to loan size.

Responding to the Review itself, MFAA CEO Mike Felton said he was ‘frustrated’ with the Review, which: “in essence recommends a consolidation of power to lenders, giving them complete oversight of mortgage brokers.” Talking to Refinance Today later about the banks’ vow to implement Sedgwick’s recommendations, Felton noted that “a number of the changes that have been suggested are of concern” and that brokers “have cause for concern”.

However FBAA executive director Peter White said the Review would cause “nothing that could damage [brokers’] livelihoods…at the end of the day we don’t come under the auspices of the ABA or the Sedgwick Report; our relationship is with ASIC and the ministers, in conjunction with Treasury’s stakeholder consultation period. We will continue to stay very strong and firmly planted in that.” The MFAA has also urged banks to stick to Treasury’s consultation process following ASIC’s separate remuneration review and avoid unilateral action.

ASIC’s senior executive leader Michael Saadat, speaking to Refinance Today, said ASIC was “pleased that industry is working to improve remuneration structures to create better outcomes for consumers”, whilst encouraging all industry participants to get involved in the Treasury’s process. Nevertheless, he indicated that banks could changes remuneration unilaterally: “these are obviously commercial arrangements and it’s up to both individual banks, aggregators and brokers businesses to work out what those arrangements should be.”

Saadat insisted ASIC had not shared any data with the Sedgwick Review. Asked whether ASIC could play a greater role in pushing through commission changes, as Sedgwick suggested, Saadat responded that “ASIC's ability to intervene may also be bolstered by law reform proposals that are currently being considered by Government, including those recommended by the Financial System Inquiry.”
Australia top choice for foreign direct investment.
Australia has retained its top-ten ranking for the seventh consecutive year in A.T. Kearney’s Foreign Direct Investment (FDI) Confidence Index. Australia was ranked 9th in the 2017 edition of the index.

According to A.T. Kearney, a global management consulting firm, the index is a forward-looking analysis of how political, economic, and regulatory changes will likely affect FDI inflows into countries in the coming years. The index is built using primary data from a proprietary survey administered to senior executives of the world’s leading corporations. Respondents include C-level execs and regional business leads. All companies participating in the survey have annual revenues of $500m or more.

Since its introduction in 1998, the index has reliably pointed toward firms’ top choices globally for FDI, with the countries ranked in the index reliably tracking closely with the destinations for the actual global FDI inflows.

In this year’s survey, 35% of respondents said they were optimistic about Australia’s economic outlook, compared to 32% in 2016. Investors from Asia are among the most optimistic and rank the country third among the most attractive investment destinations. Investors from the IT sector demonstrate the greatest interest in Australia.

“Relative to the rest of the world, Australia has seen unprecedented growth and stability. While there is broad and healthy acknowledgement that we need new answers going forward to sustain our economic growth, the fact that international investors remain interested in Australia is … good news,” said Nigel Andrade, partner and head of Australia at A.T. Kearney.

“Australia’s [generally secure] environment and the efficiency of its legal and regulatory processes are strong attractions for foreign investors. The results of this year’s Index show that these two aspects are the top factors that global investors look at when making a decision about their investment destination.”

The United States topped the index this year, holding onto its first-place position for the fifth year in a row. Germany jumped two spots to second, and the United Kingdom and Canada were also ranked among the top five.

Bank of Queensland hikes its investment mortgage interest rates.

Brisbane-based Bank of Queensland (BOQ) has hiked its investment mortgage interest rates, becoming the latest lender to follow the major banks in hiking borrowing costs.

Last Thursday, the national mid-tier lender said standard variable rates for investors would rise 10 basis points to 6.18%, effective 18 April. Moreover, BOQ’s “clear path” home loan product would increase to 5.04%.

Mirroring rival Bendigo and Adelaide Bank, BOQ left owner-occupier rates unchanged. However, Bank of Queensland raised its owner-occupier and investor rates 15 basis points in January.

Matt Baxby, BOQ’s chief of retail banking, said the hikes were the result of “recent changes to regulatory requirements,” suggesting APRA’s 30% cap on new interest-only mortgages put in place last month had fed into the decision.

“The decision to change interest rates is not one we take lightly. These changes will help ensure we continue to meet our regulatory obligations under the new industry-wide benchmarks outlined by APRA in recent weeks,” Baxby said.

National Australia Bank (NAB) kicked off the industry’s most recent round of rate reprices. On 16 March, NAB lifted its owner-occupier rates 7 basis points and investor loans 25 basis points. Rivals Westpac, ANZ, and Commonwealth Bank - plus some mid-tier lenders - also lifted their various home loan rates.

The banks blamed the reprices on the need to comply with APRA’s 10% annual growth cap on investor lending, plus higher funding costs. APRA’s recently unveiled macroprudential measures, which limits the flow of interest-only loans to 30% of new lending, likely also played a part in the changes.