An independent review of commissions and payments made to bank staff has been announced as an ASIC-led review of mortgage broker remuneration is currently underway.
Former Australian Public Service Commissioner, Stephen Sedgwick AO, has been appointed to conduct the review, commissioned by the Australian Bankers' Association (ABA), to determine if product sales commissions and product based payments to bank branch staff could lead to poor customer outcomes.
“Banks recognise that how they pay staff is an important factor in determining community trust and confidence in banks,” ABA CEO Steven Münchenberg said.
“We want to ensure that across the banking industry when people are rewarded for selling products and services they are putting customers’ interests first.”
The review will include remuneration for selling and providing advice on all products including mortgages, personal loans, small business loans, transaction accounts, general insurance products, consumer credit insurance and credit cards.
Its scope will cover customer facing employees, contractors, and third parties as well as non-customer facing roles, such as the managers and supervisors of those staff.
Payments made by banks to non-bank sales channels or intermediaries – such as mortgage brokers – will also be considered as part of the review. However, ASIC is already undertaking a comprehensive review of remuneration in the mortgage broking sector so this review will largely focus on the banks and their staff.
Münchenberg said the review builds on the Future of Financial Advice (FoFA) reforms which brought about significant changes to remuneration structures across the financial services industry.
Sedgwick will be supported by a competition and legal expert, Gina Cass-Gottlieb from Gilbert + Tobin Lawyers and a remuneration expert, David Heazlett from Mercer.
There will also be a stakeholder advisory panel which includes Gerard Brody, chief executive of the Consumer Action Law Centre; Geoff Derrick, national assistant secretary at the Finance Sector Union; Sarah Saunders, chief advocate at National Seniors; and Dr Deen Sanders, chief executive of the Professional Standards Authority.
As a part of the review, Sedgwick will consult with banks, consumer and small business organisations, the Finance Sector Union, and employees of banks, regulators and other stakeholders.
He will also be asked to provide observations and recommendations from the review to assist banks ensure they have overarching principles on remuneration and incentives to support good customer outcomes and sound banking practices.
This review has been commissioned by the ABA and is part of a package of initiatives announced by the industry in April this year to lift standards and be more accountable.