ASIC calls on brokers to raise industry standards at CAFBA summit

The Commercial and Asset Finance Brokers Association of Australia (CAFBA) surely put a lot of work into striking a diplomatic tone at this year’s Annual Commercial Property & Development Finance Summit.

"Supply & Regulation – Getting the Balance Right!" went the summit’s theme, held this Wednesday at the swanky Strathfield Golf Club.

Certainly a more diplomatic tone than the more direct stance taken by CAFBA chief executive David Bushby (pictured) in May, when he urged the government to stay out of commercial finance in an MPA opinion piece.

Yet there have been clear reasons to lay off the rhetoric a bit over the last three months.

Prime Minister Anthony Albanese’s Labor government has signalled his intent to cut back on red tape in order to lift Australia’s flagging productivity levels.

The upcoming Economic Reform Roundtable will put productivity front and centre; regulatory reforms are certainly not out of the question.

Catching up with MPA once again at the week’s Summit, Bushby reiterated his stance that effective self-regulation over restrictive government oversight is the way to go for the commercial lending sector.

Unnecessary regulation in firing line as ASIC urges industry to step up

“The bottom line is, we know there aren’t enough houses being built. And the important part of that is being able to obtain finance so that you can build the houses at prices that people can afford to pay,” said Bushby. “If you put unnecessary regulation on that, you slow that down. You make it more costly,” he said.

Bushby argued that a lot of the costs associated with building development and construction are government imposed.

While some regulations make perfect sense, “others make you scratch your head”, said Bushby, continuing: “(Regulation) needs to be there for a good reason and to not slow down development and the economy.”

In a sign that Bushby is willing to work with regulators to strike the right balance, CAFBA welcomed Calissa Aldridge, executive director, markets, at the Australian Securities and Investments Commission (ASIC) as a guest speaker at the summit.

What was Bushby hoping to hear from ASIC? “That they understand that there is a need for regulation, but when you do it, you need to think through very carefully and make sure there are no unintended consequences and that you're not putting unnecessary restraints on things that you want to actually happen.”

Aldridge’s comments to summit attendees weren’t a million miles away from Bushby’s wishes.

“ASIC is certainly not rushing into new regulation, but we're upping our oversight and we're looking for industry to step up as well,” said Aldridge. “Private markets are growing and they're an important part of our economy and private credit is good for our economy if done well… We need to make sure we continue to get that balance between opportunity and risk.”

Aldridge highlighted that 72% of all new commercial equipment financing is sourced through commercial brokers. “You are in this unique position to help influence and raise standards across the markets and I really encourage you to step up and try to inform the standards,” she told the gathered brokers.

Broker education needs a shake up

If regulation was the summit’s theme, then education was the purpose.

CAFBA has been on a mission to increase the quality of education in the commercial broking space.

Earlier this year, it unveiled PACE Premium, an online education platform designed to help brokers, lenders and aggregators to get a foothold in the commercial finance market.

CAFBA’s numerous diploma and Certificate IV courses are designed to improve the professional standards of the commercial broking industry.

Does that mean Bushby sees significant knowledge gaps in the brokers that he meets with on a day-to-day basis?

“The biggest risk in assisting businesses with their finance needs is the lack of understanding of how businesses work, of being able to read simple things like profit and loss statements in the balance sheet,” he said.

Different businesses, Bushby said, have different cultures and risk appetites, and understanding this fact is crucial. Just because a broker knows how a bank’s credit team works, that doesn’t mean they understand the ins and outs of the businesses they are there to support.

Given what’s at stake if a broker gets it wrong, it sounds like there’s a clear rationale behind regulatory oversight. While Bushby doesn’t disagree, he reiterated the virtues of effective self regulation.

“What we’d like to see is that the standards that are set in a self-regulatory way are clear and that clients understand that there are some brokers that comply with those standards and others that don’t,” said Bushby.

CAFBA, for its part, has a duty to Australian developers and small businesses that its members uphold those standards.