Commonwealth Bank has hit the pause button on the demerger of its wealth management and mortgage broking arms to better focus on remediating its customers and implementing the royal commission’s recommendations.
The embattled bank announced the demerger in June 2018, hoping to simplify their business model and focus on more traditional banking services by spinning out their Colonial First State brands and mortgage broking business Aussie Home Loans into a new, ASX listed company called “CFS Group’.
However, in a statement released on Thursday the bank said it had “suspended preparations” for the demerger in order to focus on the recommendations made by the royal commission.
“CBA is prioritising the implementation of these recommendations, refunding customers and remediating past issues,” the bank said.
The bank said it “remains committed to its strategy to become a simpler, better bank” and the demerger is still on the cards, but did not indicate when it would look to separate its wealth and mortgage broking arms out of the business.
Thursday’s announcement followed the release of an update on the banks remediation progress on March 8.
“We are implementing the Royal Commission recommendations with full transparency to the community, and will issue regular updates on our progress,” that statement said.
“Many of the recommendations require direct changes to our business and are already underway. Some of the recommendations will require action by government, regulators and industry bodies before we can implement them. We will support this work and are already considering what changes we will need to make ourselves, so that once the regulatory framework is in place, we are ready to act.”
Brokers at centre of political battle
Commonwealth Bank’s decision to postpone the demerger of its broking arm comes as both government and the opposition outlined their stances on the future of mortgage broker remuneration, with neither willing to fully adopt the recommendations made by Royal Commissioner Kenneth Hayne.
Treasurer Josh Frydenberg announced on Tuesday that the government would not ban mortgage brokers from receiving trailing commissions (annual fees paid by institutions to brokers for the life of a loan), but would instead implement a number of separate changes and review their impact in three years’ time.
The opposition, on the other hand, has committed to abolishing trailing commissions and will cap mortgage broker fees at 1.1 per cent of a property loan if it wins the federal election, expected in May.
– With AAP