Policing the banks ‘will cost more than $127 million’, consumer advocates warn

CONSUMER advocates have warned that ASIC’s new powers will be costly to enforce, meaning the $127.2 million funding may not be enough.

14/03/2008 BUSINESS: ANZ, National Australia Bank NAB, Commonwealth, St George and Westpac Bank Logo for artist montage.

CONSUMER advocates have warned that the corporate regulator’s new powers will be costly to enforce, meaning reinstated funding announced this afternoon may not be enough.

The Turnbull Government this afternoon announced a $127.2 million funding boost for the Australian Securities and Investments Commission, along with the appointment of a special prosecutor to investigate financial crime, in response to a string of high-profile scandals in the banking sector.

The four-year cash injection, to be paid for by the big banks, aims to empower the regulator to police the troubled sector and protect Australians from predatory practices.

But Choice chief executive Alan Kirkland and Consumer Action Law Centre chief executive Gerard Brody warned that additional funding was needed to give the regulator’s new powers teeth.

“This funding announcement only partially restores the cuts ASIC has faced in the last few years,” Mr Kirkland said.

“It’s also being asked to take on new powers and a new commissioner. ASIC is effectively being asked to do more with less funding than it had a few years ago.”

He called for a “clear process” for the bank levy to be increased over time.

The two consumer groups also called for a compensation scheme to be set up for consumers ripped off by dodgy financial planners and insurance brokers.

“We’ve been calling for a last resort compensation for a long time — it’s the missing piece in protecting Australians who’ve had their trust breached by banks and financial advice,” Mr Brody said.

“If Australians have been impacted by dodgy financial advice or because a financial service provider broke the law, and the provider is unable to compensate them, it’s only fair that an industry funded compensation scheme be set up to give them justice.”

The Commonwealth Bank’s subsidiary CommInsure is at the centre of calls for a Royal Commission. Picture: Torsten Blackwood

The major banks — which regularly rake in multibillion-dollar profits — have been under scrutiny following a series of consumer fraud allegations involving financial planning, as well as claims of interbank lending interest rate rigging.

Leading financial institutions, including the nation’s largest lender the Commonwealth Bank, have hit the headlines in recent years with some of them facing allegations of dodgy financial advice and life insurance, and mortgage fraud.

Treasurer Scott Morrison said the government recognised that “our banks have not always lived up to the standards we expect”.

“That’s why we are continuing to act to ensure our regulators are tough cops on the beat with the resources and powers they need to respond to misconduct and prosecute those who seek to take advantage of consumers,” he said in a statement.

Mr Morrison told reporters in Canberra that $121 million of the additional funding would be footed by the banks.

The sweeping reforms include switching to an industry-funded model for ASIC from mid-2017 instead of taxpayer funding.

ASIC, like its counterparts in the United States and Britain, has also been probing multinational banks over benchmark interest rate rigging.

The regulator recently hauled two major lenders, Westpac and ANZ, to court over allegations they manipulated the interbank lending rate.

Despite Labor pressure for a royal commission into banking misconduct and a recent Fairfax/Ipos poll showing a majority of voters supported such an inquiry, Prime Minister Malcolm Turnbull, a former investment banker, has so far resisted.

Labor leader Bill Shorten Wednesday dismissed the government’s announcement, saying there was a “culture of unaccountability and arrogance” in the financial sector that only a royal commission could address.

WHERE THE CASH WILL GO

■ $61.1 million to “enhance ASIC’s data analytics and surveillance capabilities” and “modernise ASIC’s data management systems”;

■ $57 million for “increased surveillance and enforcement on an ongoing basis in the areas of financial advice, responsible lending, life insurance and breach reporting”; and

■ $9.2 million to ensure ASIC and Treasury “can implement appropriate law and regulatory reform”.