Banks must "take more responsibility for redressing their problems", David Coleman, chair of the House of Representatives Economics Committee, told an industry summit yesterday.
Delivering the opening keynote speech at yesterday's Thomson Reuters Australian Regulatory Summit in Sydney, Coleman made the point that, while the stability of Australia's banking system is critical, stability in itself is not enough.
"We need a system that is not only stable, but works effectively for consumers," he said. "There have been too many areas in which the banking system has failed the people it is meant to work for."
Among the recommendations made and supported in this year's federal budget noted by Coleman:
• creation of a one stop shop for speedy resolution of consumer action against the banks, with the cost to be borne by industry;
• raising the level of executive accountability for poor actions taken on their watch;
• setting up a unit with the ACCC to examine systemic issue from out-of-cycle interest rate changes, and pricing in the Australian residential mortgage market; and
• the need to explore ways to implement an open data regime.
While chastising the major bank CEOs, Coleman took a moment to compliment Shayne Elliott, ANZ CEO: "In fairness, during our committee process, ANZ demonstrated a fairly constructive approach to that process, and does appear to acknowledge the need for meaningful reform in the sector," Coleman said.
"The other banks generally opposed our committee's key reform recommendations, which was regrettable."
In reference to the testimonies by the respective major bank CEOs, where none could identify any senior executives who had been terminated for poor customer treatment, Coleman said it was "untenable" to blame middle managers or rogue employees.
"Given the number of examples, there were a lot of rogues on a frolic of their own."
Consequently, a serious accountability regime focused on top level executives is on the way, with APRA to be given greater powers to monitor remuneration of bank directors and executive, and to be more intrusive in setting their roles and responsibilities.
Another critical area of concern to the committee was competition in the Australian banking sector.
"There is something of an Australian ritual to this issue - every time the banks raise interest rates out of step with the RBA there's a similar routine," Coleman said.
"The banks say they have no choice because of non-RBA factors that affect their cost of funds."
The committee's staff looked into this in more detail and found that there were 20 occasions since 2000 where banks had moved out of step with the RBA's official rate settings, and on 19 of those the moves had been to the detriment of the borrowers.
The ACCC will therefore be tasked with creating a new financial sector competition unit which will receive funding of A$13 million over four years from 2017/18, along with a further $1.2 million to conduct an inquiry into pricing in the Australian residential mortgage market.
Coleman also riffed on the need for an open data regime in the Australian banking sector - a topic that was raised several times throughout the day.
"The banks talk in general terms about how they support the concept of opening up consumer data. In reality, the enthusiasm from banks in making this happen been limited, and it's not hard to see why - the process involves a key proprietary asset of the banks becoming non-proprietary overtime and few incumbents would welcome that in any industry.
"There is a clear conflict on this issue and that's why it's very important that banks do not lead the process of opening up consumer data," he said.