What brokers need to know about Basel Three

Brokers who understand the potential impact of the Basel reforms will have a major advantage over those businesses that don’t, according to ING DIRECT executive director distribution, Lisa Claes.

 “The changes will see banks require ‘stickier’ liabilities and customers with multiple products,” she says.

Although the final details are yet to emerge in Australia, Basel reforms will require banks to increasingly match assets with liabilities, like for like. Claes says the days of borrowing short and lending long are numbered.

So as the dust settles around the prudential reform sphere, what trends may - from a practical perspective - emerge under Basel Three?

• Banks will price longer dated savings (i.e. unbreakable term deposits, deposits with 31 days’ notice period) more favourably over at call savings.
• Banks will bundle products or offer discounts for additional products which will lead to improvements in the on-boarding processes, and the universal application form (one form/ process for multiple products ) may proliferate.
• Distribution models will converge with intermediaries increasingly competing to broaden financial solutions for customers. Banks, in an effort to attract distributors competent in this regard, will undoubtedly offer unique rewards for those with proven ability to attract the one customer for many products.
• Customer propensity models which can predict at what stage of the customer’s life cycle or relationship with an institution they are more likely buy more products will become even more critical.

“The opportunities [around] Basel Three for intermediaries are clear. The liquidity incentives afforded to bank manufacturers will ensure intermediaries have multiple products to sell,” says Claes. “While the Australian Prudential Regulatory Authority (APRA) is yet to finalise all the details for Basel Three, the direction is clear. Those businesses that understand the implications have time to prepare and succeed.”