ASIC ‘too poor’ to chase rogue bankers: chairman James Shipton

James Shipton blames inadequate funding for leaving ASIC hamstrung in chasing badly-behaved bankers.

Australian Securities & Investments Commission chairman James Shipton leaves the royal commission in Sydney yesterday. Picture: AAP

Australian Securities & Investments Commission chairman James Shipton has blamed inadequate funding for leaving the watchdog hamstrung in chasing badly behaved bankers and rogue financial institutions and constraining it in “every aspect” of its work.

Appearing at the royal commission on Thursday, Mr Shipton, who took charge of the corporate regulator this year, said the government’s modest funding of its key regulator “weighs very heavily” on its ability to keep the financial system in line.

In another day of bruising revelations about the conduct of Australia’s financial institutions and the watchdogs that attempt to keep them in line, the rattling of the tin by Mr Shipton, who complained about the “legal trench-warfare” conducted by big banks and wealth managers, will put further pressure on the government and Labor to dig into the budget for more funding for regulators ahead of next year’s election.

“ASIC is under resourced compared to some of our peers globally,” Mr Shipton said. Regulators in Hong Kong, where he previously worked, had a combined budget 50 per cent bigger to cover an industry a third the size.

Mr Shipton said there were more policeman in the ACT than enforcement staff in ASIC, despite the regulator’s remit dramatically expanding over the last two decades.

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.

“It weighs very heavily on the regulatory choices that we have to make, because it means that we are restricted in our ability to take on matters or to pursue matters in a way that, perhaps, we would like to,” Mr Shipton told the commission

“We are constrained in probably every aspect of our regulatory work. It’s certainly in investigations, certainly in other matters relating to enforcement. We are constrained in our surveillance, our supervision, our important work on financial capability and other work.”

The government has been scrambling to top up budgets for cash-strapped agencies after the inquiry’s revelations.

The Australian Prudential Regulation Authority 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.

A 2015 capability review of ASIC, led by current deputy chair of the Productivity Commission Karen Chester, found the regulator was “risk averse” in launching legal cases and that it preferred suits that had a “higher probability of success” rather than “selecting cases that have strong merits but also allow ASIC to test the veracity of the law”. The same review found 15 per cent of external stakeholders believed it was “adequately” funded.

While ASIC and APRA have been castigated during the commission for a reluctance to launch cases and pursue maximum penalties against rogue corporations, the Australian Competition & Consumer Commission has been hailed as a “model litigant” for its appetite for taking cases to law and lobbying for regulations to be overhauled if it loses.

ASIC had $26m in project funding dropped from its departmental allocation in this year’s budget as projects wound up. The Abbott government’s 2014 budget cut $120m from ASIC’s budget, which was returned by then-­treasurer Scott Morrison in 2016.