Bank Bonus Hikes: Shifting the Spotlight Away from Consumer Protections
Matt Comyn's recent remarks about mortgage broker pay highlight a concerning double standard in the Australian financial landscape. The Commonwealth Bank CEO's argument that mortgage brokers should face greater scrutiny than bank lenders appears to deflect attention from the real issue: the banks’ decision to lift bonus caps that were put in place following the findings of the financial services royal commission.
The royal commission's recommendations were clear, aiming to curtail the type of behaviour that led to widespread public distrust in the banking sector. These caps on bonuses were a key measure to ensure that bank employees were not incentivized to engage in practices that could harm customers. Now, with CBA and others moving to increase these caps, it seems that the lessons from the royal commission are being conveniently forgotten.
Comyn's focus on mortgage brokers, who operate under a different compensation model, seems like an attempt to shift the spotlight away from the banks' own actions. While it is true that mortgage brokers are paid based on the loans they sell, they are also bound by a "best interest duty" to act in the borrower's favour. This is a crucial distinction that Comyn glosses over. Furthermore, the notion that brokers lack any form of pay controls is misleading, as they do not receive a guaranteed salary and their income is entirely dependent on their performance—a far cry from the salaried bankers who are now in line for even larger bonuses.
The argument that banks need to increase bonuses to remain competitive internally overlooks the broader issue of consumer trust. If anything, the royal commission showed us that the public is less concerned with how competitive banks are with each other and more concerned with how fairly they are treated by those institutions. By rolling back measures designed to protect consumers, the banks risk reigniting the very concerns that led to the royal commission in the first place.
Moreover, the idea that mortgage brokers pose a greater systemic risk than banks is questionable. Mortgage brokers have been a key driver of competition in the home loan market, providing consumers with more choices and often better deals. The banks, on the other hand, have been known to prioritize their own profit margins, sometimes at the expense of customer outcomes. If anything, the scrutiny should remain firmly on the banks, which have a far greater capacity to impact the financial system as a whole.
In the end, Comyn's comments reflect a troubling narrative where the banks seek to return to business as usual, ignoring the painful lessons of the past. If regulators are serious about maintaining the integrity of the financial system and protecting consumers, they should resist these changes and ensure that the safeguards introduced after the royal commission are not eroded. The focus should remain on creating a fair and transparent system where both banks and brokers operate under strict standards that prioritize the interests of their customers.
