Opening statement to the House of Reps Standing Committee on Economics Review of the four major banks and other financial institutions – smaller banks

Thank you, Chair for the opportunity to make this short opening statement.  My name is Greg Ward, Deputy Managing Director and Head of Banking and Financial Services for Macquarie Group.  Banking and Financial Services is Macquarie’s Australian retail and small business banking business.

I have been with Macquarie Group for 23 years, the past 14 as a member of the Executive Committee, and Deputy Managing Director since 2011.  I was appointed head of Banking and Financial Services in 2013. 

I am joined by Alex Harvey, Macquarie Group’s Chief Financial Officer and Chairman of Macquarie Group’s Asia businesses. Alex was appointed to the Group’s Executive Committee since 2018 and has been with the Group for 22 years.

Macquarie Group is an Australian-headquartered, global financial institution with more than 15,000 employees in 30 countries.  Banking and Financial Services contributes 13 per cent of Macquarie’s net profits. 

As this is the first time Macquarie has appeared before this Committee, I would like to briefly introduce you to our retail and small business banking activities.

Macquarie has provided financial services to Australian retail and small business clients for more than 30 years.  By market share, we are a small but growing part of the market, with 1.5 million customers.  Our mortgage, credit card and deposit market shares are two per cent, one per cent and three per cent respectively.  Our small business bank is focused on niche sectors such as real estate and strata agents, and providers of professional services such as accountants and engineers. This approach ensures we have the deep knowledge of our clients required to understand their needs and help them sustainably operate and grow.

While our market share is small, we have been a source of competition, innovation and customer choice in Australian retail financial services for more than three decades.

For example, we brought higher wholesale deposit rates to retail clients in the 1980s with the first cash management trust.  In the 1990s and early 2000s we brought mortgage securitisation to Australia, lowering home loan rates by around 200bps.  Our digital bank uses many of the same technologies used by media streaming, online search and social media companies, delivering a customer experience that matches the high expectations set by these other platforms.  In small business banking, we helped real estate and strata agents move to online payment of rent and strata fees by developing DEFT.

We continue to invest in innovation.  DEFT led to the development of AuctionPay, a platform for payment of home deposits without the need for cheques, increasing speed, convenience and security for home buyers and real estate agents.

Our open banking platform is already operational and the first to be introduced by an Australian bank.  We have invested heavily in robust online security for our customers.  We were an early adopter of Google Pay and Apple Pay.  And we invest in companies that bring competition and choice to the market such as Aussie Home Loans in the 1990s and, more recently, Athena and Lendi.

Technology and intermediation are critical to our ability to offer competition and customer choice. Our digital offering is underpinned by more than $A300 million of investment in our core banking platform.  We do not have a branch network and rely on brokers for more than 90 per cent of the distribution of our mortgage products.  We believe mortgage brokers are essential to competition and offer practical support for borrowers making significant financial decisions. 

I understand the Committee is interested in the implementation of the Royal Commission’s recommendations.  The final report made no specific findings in relation to Macquarie.  However, as with the rest with the sector, there is much Macquarie can learn from the case studies and the Commission’s findings.  As parliament and regulators action the Royal Commission’s recommendations, we are committed to participating in consultation and prompt implementation.

We addressed a number of the issues examined by the Royal Commission’s inquiries into financial advice in implementing an ASIC Enforceable Undertaking between 2013 and 2016.  The EU led to transformational change in our private wealth business and a comprehensive client remediation program that went back 10 years. 

We recently concluded a remediation program for financial advice clients who were charged fees for services they did not receive. As part of ASIC’s industry-wide review, we reviewed almost 10,000 client accounts and paid compensation of $A3.2 million plus interest to a small number of clients.

Ahead of the Royal Commission publishing its interim and final reports, we made further proactive changes to our business to reflect changing client and stakeholder expectations.  We discontinued grandfathered commissions in July last year, benefiting thousands of clients.  And earlier this year we ceased commissions-based pay for financial advisers.

Financial institutions are responsible for meeting high community expectations.  Where issues arise – either identified by the regulator or self-reported – the public expects these to be addressed promptly and thoroughly.  We believe Macquarie has demonstrated that we take such matters very seriously, we work constructively with regulators and put in place comprehensive measures to address material issues and prevent their recurrence. 

We take the same comprehensive approach with customer complaints.  The vast majority of customer complaints are resolved within five business days and only a very small number progress to AFCA.  Where customers are not satisfied, they can seek assistance from our Customer Advocate, who is independent of my team, or external avenues.

I am regularly briefed on customer complaints.  I spend time with customers and our intermediary networks to ensure that I understand their feedback – positive and negative - on our products, services and customer care.

We are happy to answer your questions.