NOW, WRITE HAYNE’S REPORT

THERE are two substantial elements in the – belated – moves by the banks individually and collectively to end their so-called “fees for no service” and to give customers back those grandfathered annual commissions they were paying on historical financial products.

The first is the upfront cost of the industry-wide refund of yesterday fees and commissions. The fees (for no service) element will add to something over $1 billion. As a one-off cost across the industry that’s not much more than a rounding error.

There will be a separate upfront cost in rebating historical commissions paid, but that won’t be huge judging from the cost revealed by CBA of not charging the commissions in the future.

That’s the second element in these customer-friendly changes – the annual impact of both on profits going forward.

No longer charging “fees for no service” should have a minimal impact each year going forward – because, quite simply, they are fees that (mostly) should never be charged and would not be charged in a properly governed bank.

Ending commissions is different. That was a legitimate, if dodgy revenue source – albeit one that would decline to zero over time. The CBA says that ending all those fees on certain legacy products and ending grandfathered trailing commissions will cost it around $45 million a year.

Say $200 million a year approx across the industry and, again, it’s a rounding error in net annual profits of the big four adding to $25 billion-plus.

It is of course, an extraordinarily expensive rounding error in the broader scheme.

While it would be stretching things to suggest that ‘if only’ banks had been pre-emptive in not charging fees for no service and forgoing those commissions, they might have avoided the pain of the RC.

No, they were always going to get a RC – from a future Labor government if not from this Coalition one. But they might have avoided a considerable part of the negatives; and also had a ‘customerfriendly’ example to trumpet.

Their task now is to ‘help write’ the RC’s report – the more they can do pro-actively like yesterday the better for them and indeed for all of us.

They should take as their cue Commissioner Kenneth Hayne’s very big wink, wink, nudge, nudge that he really wants to be able to recommend lighter but more effective regulation. It’s really up to the banks to help him deliver.