(Australian Associated Press)
Australia’s banks want existing regulations simplified and clarified rather than any large-scale reforms to address widespread misconduct uncovered by the royal commission into the financial services sector.
In its response to royal commissioner Kenneth Hayne QC’s interim report, the Australian Banking Association says it agrees with the commission’s suggestion that adding more regulation is unlikely to be the answer to fixing the industry’s failures.
The ABA says simplifying and clarifying current regulations could benefit customers and the industry, with a focus on specific problem areas linked to consumer protection issues, compliance complications and regulatory enforcement.
“Large scale reform would be complex, costly and time-consuming, and paradoxically, risk increasing the burden to all parties,” the ABA said in its response released on Wednesday.
“The burden of legislative reform can fall disproportionately on non-major banks and have a detrimental impact on competition.”
Mr Hayne’s interim report, unveiled in late September, blamed greed and the pursuit of profit for the widespread misconduct in the industry.
Financial services companies appeared to believe the law only applies when and if they chose to obey it and weak regulators had let much of the misconduct go unpunished, he concluded.
At the time, the heads of Australia’s big four banks – the Commonwealth Bank, ANZ, National Australia Bank and Westpac – all pledged to fix the failures highlighted by the commission.
Last month, the ABA announced the amendments to its code of practice to end ‘fees for no service’ and get banks to refund any fees incorrectly charged.
Consumer groups have called for the financial services industry to face consequences if institutions fail to comply with the law, along with a regulator with the necessary resources to pursue businesses and individuals who break those laws.
But in its response to Mr Hayne’s interim report the ABA argues that while it supports increased protections for customers, the existing regulations are complex and simplifying them would benefit consumers, regulators and the industry.
Any future regulatory reforms need to focus on specific problem areas, be developed in conjunction with the industry, and promote competition, it said.
The industry body wants to see the financial services regulator ASIC take legal action when it’s in the public interest instead sticking to its “default response” of remediation to resolve misconduct issues.
The ABA also noted the industry had already begun several reforms, including the implementation of a banking code of practice, a renewed focus on accountability and trust, and changes to staff remuneration.
“These efforts have already begun and they won’t stop until we’ve trust from all the Australians we serve,” the ABA said.