Mixed response to Hayne's regulatory rejig
While the Australian Banking Association has lauded the Hayne inquiry's recommendations for regulatory overhaul as "root and branch" reform, the proposals have drawn a mixed reaction from victims' groups, consumer advocates and banking experts.
Instead of a widely anticipated uprooting of the underpinnings of the "soft-touch" regulatory architecture erected by the Wallis Committee more than two decades ago, commissioner Kenneth Hayne has recommended the government retain the so-called Twin Peaks model.
Despite their well-documented inadequacies, APRA and ASIC have each won reprieves as the financial sector's respective prudential and conduct regulators.
Hayne has recommended some rejigging and switching of powers between the regulators - and called on each to show more enforcement grunt - but the regulatory structure as we know it, remains more or less intact.
ABA chief executive Anna Bligh, said the final report "I think, is a massive overhaul of the banking and finance industry in Australia.
"Whether it's banking, superannuation, insurance, financial advice, any other part of the sector," she said.
"There is no stone that has been left unturned by commissioner Hayne - 76 recommendations, a huge overhaul, big reform, top-to-bottom.
"This is something that will, I think, put Australia in a very, very good position to deliver the sort of banking system that Australians deserve."
In a stark contrast to Bligh's assessment, Macquarie University banking academic Patrick McConnell believes the Hayne inquiry has missed an opportunity to deliver meaningful reform of the regulatory framework.
"It's a disappointment," McConnell said after a first reading of the report.
"On Twin Peaks the commission is confused: first saying keep Twin Peaks but then ushering in what they call 'co-regulation', which will bring the regulators closer and into a more confused relationship as to who does what."
McConnell is concerned that involving both regulators in the supervision of bank executive remuneration (the BEAR regime) could get messy.
"It's hard to believe but the Commission has made BEAR even more confusing, recommending that APRA (the prudential regulator) gets into product design and implementation, which is a conduct function," he said.
Victims' groups expressed concerns about the commission's decision to stick with the existing regulatory architecture.
"Commissioner Hayne was scathing about ASIC's inaction throughout the hearings," said leading financial victims' activist, Naomi Halpern.
"ASIC hasn't been using the enforcement powers it already has, so I'm surprised and disappointed that the royal commission hasn't recommended major reform to the way it operates.
"Hayne has essentially told ASIC and APRA to be nice to each other and cooperate."
ASIC chair James Shipton acknowledged the concerns raised about ASIC's performance as an enforcement regulator in a brief statement issued last night.
"The royal commission report identified ASIC's enforcement culture as the focus of change needed at ASIC," he said.
"This focus accords with ASIC's change agenda, that has included the adoption of our 'why not litigate?" enforcement stance, the initiation of our internal enforcement review and the enhancement of our governance structures.
The Consumer Action Law Centre welcomed Hayne's recommendations to overhaul mortgage broker remuneration and to close loopholes in unfair contracts legislation, but is disappointed there were no new proposals to improve responsible lending laws.
"If there were better remedies for consumers subject to irresponsible lending—including debt waiver—this would provide an important compliance incentive", said the centre's CEO Gerard Brody.
With the exception of NAB, each of the major banks acknowledged in statements issued last night the social harm that their business practices had caused.
ANZ chief Shayne Elliott was particularly outspoken about his disappointment with his bank's record.
"This is a defining moment for both our company and industry. It has been a humbling experience for me, our leaders and all our people - we have learnt from this and accepted responsibility for our failings," he said.
"I recognise the size and nature of our compliance and culture challenge. And I am determined we deal with it."