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COBA op-ed on Royal Commission

By Michael Lawrence, COBA CEO

The Financial Services Royal Commission is already changing banking.

The Financial Services Royal Commission is already changing banking.

At the very least it has strengthened the hand of regulatory compliance managers at the major banks.

The Government is bringing forward policy announcements to toughen ASIC’s powers and increase the consequences of misconduct.

Some of the individual victims of misconduct are finally getting justice.

But no-one wants a Royal Commission every five years just to keep the financial sector honest.

Customer owned banking institutions have a built-in advantage on their listed competitors in complying with consumer protection regulation because customers are our number-one stakeholder. We’re not trying to maximise returns to shareholders by squeezing customers and cutting regulatory corners.

Players who treat the regulatory framework as optional should find a regulator on their doorstep. It’s up to the regulators to enforce the laws to protect consumers.

Although ASIC has undoubtedly lifted its game since a Senate Committee described it in 2014 as a “timid, hesitant regulator”, it appears that some players continue to think that the risk of laws being enforced is low.

The Royal Commission has made multiple potential findings of failures to comply with laws, regulatory guides and codes.

In the current environment where regulators and consumer groups are calling for new laws to tackle the problems being examined by the Royal Commission, it is important to distinguish between proposals that will increase regulatory compliance costs for all players and proposals to empower regulators to tackle misconduct.

The solution to the problems identified is not necessarily imposing yet another layer of regulatory obligations on all banking institutions. Indeed, prescriptive new laws will dampen competition and innovation and may not address the cultures and business models that have created the problems identified by the Royal Commission. An institution with a culture that fails to comply with existing laws is not likely to change in response to new laws.

A better solution to the problems identified by the Royal Commission may be a combination of:

  • more effective surveillance, supervision and enforcement and better resourced regulators, and
  • finding ways in the regulatory framework to encourage and reward entities with a strong customer focus and a strong compliance culture.

It is extremely impressive watching the way the Commissioner and Counsel Assisting are working through such a huge volume of material to illustrate what has gone wrong and why.

We look forward to the outcome of this focused, forensic performance in the Royal Commission’s interim report later this year. Under the Royal Commission’s Terms of Reference, it is required to have regard to the implications of any recommended changes to laws for access to and the cost of financial services to consumers and for competition.

Keeping competition in the frame is critically important given that the Productivity Commission’s recent finding that our banking market is a “strong oligopoly with four major banks holding substantial market power”, supported by “regulatory settings which contribute to the major banks’ structural advantages.”

Op-ed on Royal Commission87.25 KB

For more information please contact:

Daniel McDougall, Senior Manager – Media and Communication

02 8035 8444 or 0407 637 541, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Customer Owned Banking Association is the industry body for mutual banks, credit unions and building societies.  See www.customerownedbanking.asn.au


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