Commissions face cuts

Big Bank levy: brokers might wear fallout

THE Big Bank levy could trigger a shake-up in commissions for mortgage brokers, according to a Queensland financial chief.

That’s because Big Banks might look to cut costs to soften the impact of the $6 billion levy, Toowoomba-based Heritage Bank chief executive officer Peter Lock said.

One way of cutting costs could be rejigging how much they pay brokers. “That’s a real probability,” Mr Lock told News Corp.

This would flow on to smaller lenders, who might receive more applications from brokers or might have to cut their own commissions.

The scenario was among different ways executives think the shock levy, announced in the Budget this month, would work. It levies a 6-basis point charge on assets over $100 billion of Commonwealth Bank, NAB, Westpac, ANZ and Macquarie Bank.

Mr Lock favourably viewed the levy in conjunction with two other government moves – a Productivity Commission review into financial competition and potential reforms on capital for customer-owned operations. “We believe this is a positive move to help level the playing field in banking,” said Mr Lock, whose 61-branch outfit is customer-owned.

Mr Lock argued the levy helped because the funding advantage for Big Banks, who the market sees as being backed by Government in a worst-case scenario, would start to dissipate.

Among other potential reactions could be increased competition for smaller deposits, Mr Lock said. Heritage did not have a set scenario but had to be ready to act on any banking industry changes, he said.

Bank of Queensland CEO Jon Sutton described the levy as a “small step … to level the playing field”.

But he warned that the drafting of the legislation was critical and the implementation needed to be well considered to ensure there were no unintended consequences.

Other measures that would improve competition included looking at the difference in how much capital regional banks have to hold against loans, as compared to the Big Four.

While the Australian Bankers’ Association has been vocal in criticising the levy, Mr Sutton and the institution itself denied any split existed.