Banking royal commission: parties gear up for bank-bashing poll

Labor and the Coalition are shaping up for an election battle over which party can be tougher on the banks.

Josh Frydenberg outlines the government’s response to the findings of the financial services royal commission. Picture: Kym Smith

Labor and the Coalition are shaping up for an election battle over which party can be tougher on the banks, with the timing of Kenneth Hayne’s report leaving the government unable to legislate the bulk of the proposed reforms before Australians go to the polls.

Josh Frydenberg yesterday vowed to “act on” all of Mr Hayne’s recommendations, but stopped short of agreeing to implement proposed changes to make mortgage-broking fees more transparent by charging them directly to borrowers.

Opposition Treasury spokesman Chris Bowen vowed in-­principle support for all 76 recommendations to crack down on banking industry misconduct, declaring it a “dark day” for the fin­ancial industry and accusing the government of “weasel words” for failing to commit to the full set of proposed reforms.

Responding to the royal ­commissioner’s report yesterday, the Treasurer said the financial sector “must change, and change ­forever”.

“My message to the financial sector is that misconduct must end and the interests of consumers must now come first,” he said.

Mr Frydenberg said the government would amend legislation before parliament to extend civil penalties to trustees and directors for breaches of their duties.

But with only a small number of sitting days left before the election, there would be unfinished business to complete after the poll.

“We only have a few weeks left before we get into the budget sittings, so they are decisions that the government will take in due course about timing arrangements,” he said.

Mr Bowen challenged the government to open discussions with Labor on prioritising legislation for key recommendations that could be passed immediately “if we have enough sitting days”.

“We have a part-time government with a part-time parliament. It’s distinctly possible that nothing gets passed before an election (and) it’s all left to an incoming government,” Mr Bowen said.

“There are elements here which if the Treasurer and I sat down and had a discussion, I’m sure we could both agree on fairly quickly and agree on getting legislation passed.

“But it’s distinctly possible that won’t happen.”

Mr Bowen attacked Mr Frydenberg’s failure to adopt Mr Hayne’s recom­mend­ation for mortgage brokers’ fees to be paid by borrowers rather than lenders, as part of a consumer-­focused shake-up of the sector.

“We adopt the full recommendations in principle,” he said.

“The government simply cannot say that they’ve accepted the recommendations. I mean they resisted this royal commission every step of the way and now we have the royal commission report and they’ve got weasel words in there about various recommendations including that one.”

As part of the government’s response, Mr Frydenberg said there would be a new industry-funded compensation scheme as a safety net for consumers and small businesses ripped off by financial firms, while a new oversight authority would hold financial regulators to account.

However, the promised new oversight body, which will report on the performance of ASIC and APRA, will have limited powers.

The government has made clear that it will “not have the ability to direct, make, assess or comment on specific enforcement actions, regulatory decisions, complaints and like matters”.

Under the proposed shake-up, the government would expand the jurisdiction of the Federal Court to fast-track the consideration of corporate criminal misconduct in cases brought by regulators, ­ensuring they are not delayed by heavy backlogs.

The government has also adopted a recommendation to ensure that workers are only defaulted once into a superannuation account — a move that represents a shift from the current model where funds attain default status through enterprise bargaining agreements or the award system.

A taskforce will be established to implement the delivery of the government’s reforms and in three years an independent inquiry will review whether industry practices have changed.