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BFCSA: Election 2016: Scott Morrison warns banks: Bill Shorten on the attack: Consumers denied Justice

Posted by on in ROYAL COMMISSION URGENT
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Election 2016: Scott Morrison warns banks not to pass on ASIC costs

Australian Financial Review Apr 20 2016 6:48 PM

Phillip Coorey

 

Australia's banks will pay $121 million over the next four years to fund sweeping new powers and resources for the Australian Securities and Investments Commission, in a bid to clean up the culture of financial scandals and try and neutralise Labor's call for a royal commission into the financial services sector.

But the package has failed to appease the Opposition, which said the banks will be popping champagne corks.

"We will not let this issue go," said Labor leader Bill Shorten, confirming banks will be come a political football over the next 10 weeks in the lead-up to the election.

The funding, which puts backs the $120 million the Abbott government took from ASIC in the 2014 budget, will enable ASIC to both respond better to misbehaviour as well as try and head it off in the first place through improved surveillance.

The money included $61 million to upgrade ASIC's technology and data systems and $57 million for ongoing surveillance and enforcement. When ASIC's budget was cut, chairman Greg Medcraft complained it would not longer be able to carry out proactive surveillance.

Another $9.2 million will be used to implement new measures recommended by David Murray's Financial System Inquiry. There will be a product design and distribution obligation so the banks would have consider the needs of their customers when they design and sell products.

Banks would be required to take into account the risk/return profile of their customers and make sure a product is suitable. They would also need to "stress-test" products and determine how products should be distributed.

There will also be a product intervention power to allow ASIC to go into banks and amend marketing materials, insist on warnings to consumers, restrict distribution or, in extreme circumstances, ban products. 

Controversially, Mr Medcraft, a Labor appointment, had his tenure extended for only 18 months while he implements the changes. Treasurer Scott Morrison and Assistant Treasurer Kelly O'Dwyer denied this was a sign of no confidence in Mr Medcraft.

"This is the job we want him to do," Ms O'Dwyer said.

The changes also include and an extra commissioner appointed to prosecute financial crimes and ASIC will be exempt from the public service act so they can recruit people from the corporate sector more easily.

There will also be three reviews: One into ASIC's enforcement regime, including the current penalty regime, and another into whether the various dispute resolution mechanisms can be streamlined into a one-stop shop tribunal "to ensure that people's complaints can get to a point of mediation and consideration" within a reasonable period of time without having to use lawyers. 

The third will be into granting greater access to the banking ombudsman.

The government wants to lift caps so more small businesses and individuals can get access to the banking ombudsman. Presently, access is denied if the disputed amount is more than $500,000. 

The $300,000 cap on the amount that somebody can be compensated will also be lifted.

An extra $5.2 million will be allocated to the superannuation complaints tribunal to clear the backlog of complaints.

'I WOULD BE FURIOUS'

The funding reversal follows the introduction of user-pays funding model, in which those that require the greatest level of regulation, such as banks, pay more to fund the regulator.

"I think is easily digestible by the banks and must be and should be and I would be furious if I thought this was being sought to be passed on to the banks and you can be absolutely assured they...would already have got that message from me."

Mr Morrison said he would be "furious" if the banks sought pass this cost onto customers and he had told them so. 

The changes failed to satisfy the Opposition.

"If just funding ASIC was going to stop the problem we wouldn't have the problems we've got. No, it's not enough. Asking the regulator to investigate themselves isn't going to fix anything," Labor leader Bill Shorten said.

"What we need is a proper examination of the widespread health of the banking sector. Australians know that even though we live in a period of low cash rate, they haven't seen credit card interest rates track downwards the way we've seen mortgage housing rates track downward.

"We see irresponsible lending practices. We see practices in the insurance industry where it almost seems systematic organisation to deny people legitimate claims. The banking and financial services sector has got to stop thinking that somehow they are immune from public opinion. The Liberal Party needs to choose the people, it needs to put people first or the banks first."

Mr Shorten said the banks may grumble about having to pay $120 million but "they'll be popping champagne corks tonight that Malcolm Turnbull isn't pushing them on a Royal Commission"

Mr Morrison said Mr Shorten was "cynically exploiting the concerns and fears of Australians when it comes to how that's been impacting on their daily lives".

"He's politicising their pain and I think this is a reckless way for a Leader of the Opposition to behave who pretends to think that he can be responsible for a $1.6 trillion economy."

The proposed changes to ASIC and banking laws would bring Australia in line with international jurisdictions such as the UK, better protecting customers from banks seeking to profit by selling them inappropriate products.

The banking industry supports both of the new laws in principle, but says the government needs to take care with their design to ensure excessive costs are not imposed on the industry. 

Nationals Senator John Williams who has been leading the push inside the Coalition for a royal commission, said the changes were a step in the right direction but he still believed a commission could be needed.

"If it doesn't fix it then a royal commission may be on the agenda in the years to come".

 

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