Banking royal commission: bill to hit $1bn for ASIC’s new teeth

The government could be on the hook for up to $1 billion to properly fund the corporate watchdog.

ASIC boss James Shipton has complained regulators in Hong Kong, where he previously worked, had a combined budget 50 per cent bigger to cover an industry a third the size. Picture: AAP

The Morrison government could be on the hook for up to $1 billion to properly fund the corporate watchdog, after committing to review the resourcing for financial regulators in this year’s federal budget.

Kenneth Hayne’s royal commission has gifted a substantial increase to the corporate regulator’s responsibility and remit, which have already ballooned over recent decades.

Although ASIC was hammered by Mr Hayne for failing to more willingly take rogue financial companies and executives to court to penalise them for misconduct, the corporate regulator has come out best compared to sister regulator, the Australian Prudential Regulation Authority, which had its role in guarding against misconduct significantly watered down in the former High Court judge’s final report recommendations.

The Morrison government recently tipped an extra $70 million into ASIC’s coffers to help it launch legal cases against financial groups and to help it put officers inside large institutions. However, the piecemeal nature of the funding has continued to be criticised by the watchdog.

“The findings and recommendations from the royal commission, along with more than 20 referrals, will require the regulators to take on new responsibilities and, in many cases, simply do more,” Treasurer Josh Frydenberg said. “The government will work with the regulators to ensure they remain appropriately resourced and will consider what additional funding is required in the 2019-20 budget.”

New ASIC boss James Shipton has complained regulators in Hong Kong, where he previously worked, had a combined budget 50 per cent bigger to cover an industry a third the size.

Along with emergency top-up funding to ASIC, APRA was recently given an extra $60m, the Commonwealth Director of Public Prosecutions got a $42m injection, and the Treasurer has earmarked a further $10m for the Federal Court over four years.

ASIC’s expenses run close to $400m a year, while APRA’s budget costs $130m. A tripling of funding could increase this to more than $1.5bn.

Treasury has been drawing up new policy proposals to invigorate ASIC’s budgetary position. But it is understood those plans fall short of what Mr Hayne has recommended, and what the government has agreed to adopt.

Royal commission recommendations that will see a bigger role for ASIC include subjecting mortgage brokers to best-interests ­duties, making industry codes mandatory and enforceable, more regular communications from ­advisers to customers, tougher ­directions powers and product intervention powers that are already underway, subjecting superannuation director duties to a civil penalty regime and toughening supervision of the $2.7 trillion super sector, tougher disciplines for financial advisers, co-regulating banking remuneration, and an approach to legal action on a “if not, why not” basis.

Mr Hayne also proposed that enforcement staff at ASIC be separated from staff tasked with taking the banks to court, to ensure the regulator does not become “captured” by the industry.

ASIC has long struggled to keep the industry in line due to its poor funding. In recent years, ASIC only had six staff members looking over the entire super industry, although this has recently grown to 30. APRA only had 20 staff members looking at super funds. ASIC had $26m in project funding dropped from its departmental allocation this year.