Some financial institutions were still dragging their heels on reform despite the pressure for change emerging out of the Royal Commission (RC), Australia’s top financial regulator said last week.
James Shipton, Australian Securities and Investments Commission (ASIC) chair, told the Parliamentary Joint Committee on Corporations and Financial Services on Friday that the industry had been shown as “dishonest” to consumers, the community and regulators during the RC hearings.
“And unfortunately, whilst we are hearing important acknowledgements from leaders of financial institutions about change, such change is not happening as quickly as it should.
ASIC is still experiencing slow and delayed responses from financial institutions and, in some cases, overly technical responses aimed at delay,” Shipton said. “Due process is important, but it must not be manipulated to disrupt the achievement of fair, appropriate and honest outcomes.”
Appointed last year to replace Greg Medcraft, Shipton urged the Australian parliamentary committee to back draft regulation extending ASIC’s power to punish and launch pre-emptive strikes.
“… it is vital that the increased penalties and regulatory powers – product intervention powers, design and distribution obligations, as well as a directions power – pass the Parliament as soon as possible,” he said.
Shipton also questioned the current ASIC funding model that has seen the corporate cop’s budget cut this year. He said as ASIC moves to a new “industry funding regime” this year, the government should consider whether the regulator was resourced sufficiently to meet the “community’s expectations and the unique challenges of Australia’s financial system”.
“For me, my own experience as a regulator in Hong Kong, in a system that also has an industry funding model, is instructive,” Shipton told parliament. “There, on an adjusted basis (in terms of financial services GDP and financial services population), Hong Kong’s financial regulators are three times the size of Australia’s.”
Last week ASIC’s NZ counterpart, the Financial Markets Authority (FMA), confirmed it would publish the first part of a limited review of the local financial services industry early in November.
In a market update, FMA chief, Rob Everett, says the banking ‘culture and conduct’ review – a joint venture with the Reserve Bank of NZ (RBNZ) – included “on-site monitoring visits with 11 banks, conducted about 400 interviews, received more than 1000 documents and visited 13 towns and cities around NZ”.
“Our review was based on interviews with bank staff and directors, and documents supplied to us by the banks – it was not an audit of individual files or accounts, or a detailed inquiry like that of the Royal Commission in Australia,” Everett says. “We have relied on the information and insights provided to us directly by banks, consumer and industry bodies, and other external stakeholders.”
While the NZ report would not name-and-shame individual institutions à la the RC, he says the regulators expected the banks ”to take our recommendations seriously, and devote sufficient focus and resources to making any necessary meaningful improvements”.
The results of a similar FMA/RBNZ probe into the insurance industry are due for publication in December.