The Banking and Financial Services Royal Commission
Paul Rathbone, CEO Classic Funding Group has gathered his initial thoughts on the Commission recommendations issued on February 4th 2019.
The Banking and Financial Services Royal Commission published its final report last night and while it will take time to digest the full report and assess its impact on the lending landscape it is clear that the short term influence on commercial lending will be limited.
However, recommended changes by the Commissioner to the residential mortgage, insurance and superannuation incentives, upfront fees and trailing commissions could have a longer term impact as both the current Government and the Opposition have indicated they intend to implement the Royal Commission’s recommendations. While Classic Funding Group is delighted that the Commission has tried to ensure that SMEs maintain access to appropriately priced credit there are some warnings that need to be heeded.
With Mortgage brokers likely to have a large part of their income removed by June 2020 and with an increased focus on ensuring that their customers’ interests are at the forefront of loan and lender selection there is no question that intermediaries are going to look to diversify their livelihoods to replace the current income streams. A logical place for this diversification is into commercial lending.
While a guiding principle of the Commission was to minimise additional commercial lending regulation that could impact SMEs’ access to credit, this will change quickly if commercial lenders and aggregators don’t find a way to:
- Educate introducers that are transitioning across to commercial customers; and
- Ensure that commission structures are ethical to incentivise brokers to apply for the most suitable credit solutions rather than higher cost loans that pay higher upfront fees to the broker but increase the cost of capital to SMEs.
‘The outlook for non-bank commercial lending looks positive’ says Paul Rathbone, CEO Classic Funding Group ‘and the minimal changes to the rules that govern small business lending is a great outcome. It is now incumbent on us to help educate introducers who need it and as an industry maintain our standards to ensure that we do not see the headlines of “Theft and Greed” applied to us’.