Parliamentary committee blasts ASIC for letting the big banks get off ‘scot-free’

A parliamentary committee has blasted ASIC for letting the banks off ‘scot-free’ and failing to crack down on systemic failings.

ASIC Chair James Shipton appearing at a House of Representatives standing committee on Economics, at Parliament House in Canberra. Picture Kym Smith

A parliamentary committee has blasted the corporate regulator for letting the big banks off ‘scot-free’ and neglecting to crack down on systemic failings in the financial system.

In its review of the Australian Securities and Investments Commission’s 2017 Annual Report, the House of Representatives standing committee on economics cited “shocking examples of misconduct” exposed by the banking royal commission and criticised the regulator for not being tough enough and relying too much on enforceable undertakings.

“Evidence provided to the Royal Commission has exposed parts of the financial sector as having a corporate culture motivated by greed and lacking in moral leadership,” the committee concluded.

“However, evidence of systemic failings also places the Australian Securities and Investments Commission (ASIC) in the spotlight because it is the regulator responsible for promoting investor and financial consumer trust and confidence, and ensuring fair, orderly and transparent markets”

The royal commission has uncovered a litany of scandals over the course of the year, including banks charging clients — in some cases dead clients — fees for no service, failing to report breaches to the regulator and attempting to mislead or deceive the regulator.

“ASIC needs to be tougher,” the committee said in its review. “Australians expect the big banks and others to fear their regulator. There have been too many examples where ASIC has not adequately penalised those it regulates. The heavy reliance on enforceable undertakings, for example, rather than seeking court-imposed penalties, has not met community expectations.”

ASIC has been forced to defend the actions it has taken against the banks as the royal commission hearings have gone on, and itself was the target of a grilling from commissioner Kenneth Hayne in last month’s hearings on superannuation.

The committee, in which Victorian MP Julia Banks was a member, said it would continue to scrutinise ASIC’s performance in relation to the new banking and financial services regulations and initiatives flagged by the government and that it supported the regulator’s call “to restore trust, eliminate conflicts of interest and raise standards of professionalism in Australia’s financial services industry”.

The government last month announced it would expand ASIC’s powers by providing it with an additional $70 million to embed the regulator’s staff in financial institutions in a bid to keep them in check.

“This commitment of new funding will enable ASIC to more closely supervise the big banks and better pursue and prosecute those who engage in misconduct in corporations and within the financial services industry,” the committee said.

The committee noted that new ASIC chair James Shipton and deputy chair of enforcement Daniel Crennan were committed to taking a stronger stance on enforcement, which would be supported by the government’s additional funding.

But it was critical of ASIC’s “lacklustre response” in dealing with insurer AAMI’s conduct over the 2015 Wye River bushfires in Victoria.

“Given there has been some commentary that ASIC in the past has not been the tough and feared regulator it should be, the committee is of the view ASIC should have acted sooner and that the penalties imposed on AAMI more severe.”