Leading analysts at S&P Global Ratings have commented on the major banks’ use of brokers, saying that trends in third party channels are not indicative of any additional risks for the industry.
These views come from the agency’s analysis of major bank lending practices including governance and controls around brokers, said Sharad Jain, S&P director of financial institutions ratings, at an Asia-Pacific Banking Insights session entitled
What's The Latest Credit Outlook For Australian Banks? held yesterday (29 November).
Despite these views, Jain admitted there may be constraints around making informed commentary in this area.
“We do not see any significant difference in the outcomes [between broker and proprietary] but that data itself is constrained because [it] does not come through any period of significant stress.”
While on the face of it, there may seem to be additional risks through brokers, current data does not back this up, he said.
Nico de Lange, another S&P director of financial institutions ratings speaking at the event, predicted that the broker channel would continue to be a major source of new business for the major banks.
“It will remain a channel that they [will] be focusing on but what might happen is that there might be different strategies within the major banks on the importance that the broker channels might play.”
While some of the major banks had been increasing the use of brokers, others such as the Commonwealth Bank of Australia (
CBA) had slightly decreased their use of third party, he said.
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