Treasurer Josh Frydenberg vows to clean up banking

Josh Frydenberg vows to restore trust in the financial system, as the government races ahead of the royal commission report.

Treasurer Josh Frydenberg. Picture: AAP

Josh Frydenberg has pledged to restore trust in the financial system, backing Prime Minister Scott Morrison’s in-principle intention to adopt all of the recommendations from Kenneth Hayne’s banking royal commission, in a move that could spark a generational overhaul of banking regulation, conflicted kickbacks and regulator funding.

Also, the government has been racing ahead of the royal commission’s final report with a view to launching an imminent capability review of the banking regulator, the Australian Prudential Regulation Authority.

The royal commission revealed APRA had been impotent in taking rogue financial institutions to court, despite knowing of widespread misconduct.

Although the Treasurer would not confirm the review ahead of the publication of the final report for the banking royal commission on Monday, The Australian understands Treasury has been drafting terms of reference and seeking expert panel members for a wide review of APRA’s ability to clamp down on misconduct in the banking, superannuation and ­insurance sectors.

Mr Frydenberg said the government’s primary focus on responding to the landmark document would be on improving consumer outcomes, ensuring the continued flow of affordable and timely credit, maintaining and improving competition in the banking sector and not inadvertently increasing the power of the banks through new regulation.

The government is also looking to shut down future Labor ­attacks by taking an in-principle intention to adopt all the recommendations from the Hayne ­report, after opposition Treasury spokesman Chris Bowen promised to adopt all the commission recommendations.

“As the Prime Minster has said on the 7.30 Report, while in principle that may be our intention, we have to receive the report and read it in a considered manner ­before reaching a final decision,” Mr Frydenberg said.

“The principal focus for the government is to ensure better outcomes for consumers and to restore the public’s trust in our ­financial system.

“Trust is at the core of our ­financial system and once it’s lost, it’s not easily regained.”

Mr Frydenberg has also reaffirmed a pledge to ensure banks are not unnecessarily restricted from lending to borrowers, as new official figures showed credit growth slowed to its weakest ­result in five years.

Reserve Bank figures showed housing credit crew 4.7 per cent over the year, the lowest result since July 2013.

“The government will also be considering the report’s recommendations in the context of competition in the sector as competition is key to economic growth,” Mr Frydenberg said

“In responding to the royal commission, the government will also consider implications for the provision of credit.

“We must ensure affordable and accessible access to finance for households and businesses. The free flow of credit is critical to the health of the Australian economy.”

Mr Hayne’s interim report also sent out a broadside against Australia’s regulatory architecture, arguing laws protecting the banks from competitive pressure has led to complacency and fee gouging across the sector.