The MFAA's campaign for reforms to the banking system seems to have the attention of our politicians - so what next? We speak to the MFAA's Phil Naylor and Tim Brown of Vow Financial for their thoughts on Australia's banking system and how the proposed changes could revolutionise the broking industry.
Video transcript below:
Donna Sawyer, Australian Broker TV
Donna Sawyer: The MFAA has again taken its campaign for reforms to the banking system to the halls of power in Canberra and it seems our politicians are finally sitting up and listening. CEO, Phil Naylor says the MFAA is calling for the government to adapt Canada’s mortgage backed securities and mortgage bond model to the Australian banking system.
Phil Naylor, MFAA
Phil Naylor: The problem with the Australian lending market is lack of access to competitively priced funding. We have had the major lenders complain about the global funding costs. And we have had smaller lenders, non-bank lenders being concerned about access to funds. So we have looked all around the world and the only system we can see that really we think could be adapted to Australia is the Canadian system, where the government guarantees a securitisation program and that provides relatively cheap funding compared to other sources of funding, which both large and small lenders use.
Donna Sawyer: And mortgage brokers couldn’t agree more. Tim Brown of Vow Financials says the reforms are critical to encourage fair competition between the big four banks and non-majors.
Tim Brown, Vow Financial
Tim Brown: But I think for the industry it is such a crucial component of competition which the government keeps on saying that they want. And certainly statistics from the ABS for the last quarter show that the four major banks through their subsidiaries still control more than 90% of the market. So the removal of penalty fees has not worked. And therefore they need to go to the depth of the real problem which is allowing some of the smaller lenders access to the same sort of funding that the majors are getting access to and that’s the only way we will improve competition in this market.
Phil Naylor: The whole thing about the Canadian model is it allows more lenders to operate viably in the marketplace. So that means a wider choice of lenders, more products and that of course is good for competition, it gives borrowers greater choice and it also enables brokers to be able to have a far wider choice of different products and lenders to be able to recommend to their clients.
Donna Sawyer: But the campaign for change is far from over as a final decision from the government is not bound by Senate Committee recommendations.
Phil Naylor: We have given this argument 3 times or twice before in 2008 and 2010 and although we got some recognition on those previous occasions, it was fairly lukewarm on this occasion. I really was confronted by a lot of interest in what we were trying to do and there are a lot of questions about the detail of the program, so that led me to believe there is interest, it was across all parties, it was bipartisan approach to it, which is encouraging. Of course, with Senate Committees there is no guarantee whether what they recommend will come into being, but nevertheless it’s a good start.
Tim Brown: I think it should be part of the political agenda for both parties going into the next election and certainly I would like the industry, the MFAA that is to really push both parties to make it a hot topic for the next election.
Phil Naylor: There is a campaign that we have been running for a number of years and we’ve certainly ramped it up with this Senate enquiry and we will continue to lobby politicians and regulators to get them to see the merits of the system.
Donna Sawyer: This is Donna Sawyer reporting for Australian Broker TV.