Government pauses on banking reforms from royal commission recommendations

Coronavirus impact leaves banks needing to focus on customers, says Treasurer.

Treasurer Josh Frydenberg: The government had previously committed to introducing legislation on the commitments from the royal commission in two rounds this year, the first by June 30 and the second by December. Picture: AAP

The federal government will delay implementing the recommendations of the banking royal commission by six months so the financial services industry can keep its full attention on minimising the fallout from the COVID-19 crisis.

Treasurer Josh Frydenberg announced the deferral on Friday in a move widely backed by consumer groups. The delay would enable the industry to focus on supporting its customers and staff through the crisis while planning for the recovery from the pandemic, the Treasurer said.

“This announcement balances the need to implement the recommendations of the royal commission with the need to ensure our financial institutions are in a position to devote their resources to responding to the significant challenges posed by the coronavirus.

“The changes will also provide certainty and clarity to all stakeholders about the government’s commitment to implementing the recommendations arising out of the royal commission,” Mr Frydenberg said.

Of the royal commission’s 76 recommendations laid out by Commissioner Kenneth Hayne in early 2019, 54 were directed to the government and most required the passing of legislation.

The government’s implementation roadmap aimed to have 90 per cent of its commitments enacted by the end of June 2020, including introducing legislation that would ban the hawking of superannuation and insurance products and require an annual renewal of financial advice.

Legislation on the remaining recommendations, including introducing a compensation scheme of last resort, was scheduled to be in place by the end of the year.

Both of these rounds of legislation have now been delayed by six months.

Consumer groups including Choice and the Consumer Action Law Centre backed the government’s decision, even writing to Mr Frydenberg last month acknowledging priorities had changed due to the coronavirus crisis.

Consumer Action Law Centre chief executive Gerard Brody on Friday called the deferral a “sensible compromise”.

“These reforms are crucial to help protect consumers from financial service industry practices that were shown to have caused severe and long-lasting harm to people across Australia,” Mr Brody said.

“We appreciate that the fallout from COVID-19 has forced the government to drastically change its priorities and focus in the short-term. We consider a six-month deferral of these much-needed reforms a sensible compromise.”

But any further delay would create a greater risk that progress on reforms would be lost and consumers – particularly those most vulnerable – would continue to suffer, he warned.

Australian Banking Association chief executive Anna Bligh also backed the move by the government.

“The industry remains resolutely committed to implementing the recommendations of the royal commission and will continue to do so within the new timeframes set by the federal government,” she said.

“Today’s move by the government is a sensible recognition of the enormous efforts banks are making in supporting customers and the Australian economy through this COVID-19 health and economic crisis.”

Mr Frydenberg’s announcement came hours after Ms Bligh revealed the nation’s biggest lenders had deferred more than 640,000 loans worth $200bn due to the pandemic, by the end of last week.