Reforms must take into account economic wellbeing

A year ago today, the Morrison government received Commissioner Hayne’s final report into misconduct in the banking, superannuation and financial services industry. After 10,000 plus submissions and 68 days of hearings, the report provided a forensic assessment of practices and behaviour which, in many instances, were in breach of the law and fell well below community standards and expectations.

In Hayne’s diagnosis of what led to the misconduct, he found “too often, the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty.” For this, “primary responsibility…lies with the entities concerned and those who managed and controlled those entities: their boards and senior management.”

This was a scathing assessment, the reverberations for which are still being felt a year on.

The report’s 76 recommendations were far-reaching in their scale and scope and were directed towards strengthening consumer protections; improving accountability and governance; enhancing the effectiveness of regulators and providing greater access to redress for those impacted by the misconduct.

Within four days of receiving the report, we agreed to take action on all 76 recommendations and subsequently set out an accelerated timetable for their implementation, together with an additional 18 commitments the government had made.

Under this timetable, by the middle of this year more than 50 commitments – close to 90 per cent – will be implemented or have legislation before the Parliament.

By the end of this year, the remaining royal commission recommendations requiring legislation will have been implemented or introduced.

To put this timetable in perspective, it took the previous Labor Government almost 23 months from the time the Joint Parliamentary Committee reported and when the then Government first introduced legislation on the more narrow Future of Financial Advice (FOFA) reforms.

With respect to our implementation timetable, we are on track and making good progress.

We’ve implemented 16 commitments, have legislation before Parliament to implement another eight and have substantially progressed a further 35 which are being consulted on ahead of their introduction.

Among the 16 already implemented is the abolition of grandfathered conflicted remuneration for financial advisers, the prohibition on superannuation funds treating employers with gifts or entertainment and the expansion of the Australian Financial Complaints Authority’s remit to consider disputes dating back over a decade.

Among the eight commitments for which legislation is before the Parliament are the establishment of a best-interest duty for mortgage brokers and the banning of unfair contract terms within insurance contracts, which will put the insurance sector on the same footing as banking, telecommunications and energy.

Of the 35 commitments with exposure draft legislation out for comment, are the prohibition of hawking of superannuation and insurance products, the regulation of insurance claims handling and stronger reference checking and compliance reporting for financial advisers and mortgage brokers.

A key area of focus for us has also been ensuring that the roles of the regulators are clear, that they are properly resourced and that they are enforcing the law.

We tasked former chairman of the Australian Competition and Consumer Commission (ACCC) Graeme Samuel to undertake a capability review of the Australian Prudential Regulation Authority (APRA), the recommendations of which are being implemented.

In the 2019-20 budget, we provided over $400 million in additional funding for the Australian Securities and Investments Commission and a further $150 million for APRA, taking funding for both bodies to record levels.

ASIC and APRA have also reviewed and strengthened their approach to enforcement, including establishing an office of enforcement within ASIC.

The changes we are making following the royal commission complement and build on the reforms the Coalition had already been implementing, including the Banking Executive Accountability Regime (BEAR), the increase in both civil and criminal penalties for breaches of financial services law and the establishment of AFCA, which has since its inception on November 1, 2018, already resolved more than 72,000 complaints and awarded over $237 million in compensation.

As we implement the wave of reforms flowing from the royal commission, it is vitally important we remain mindful of the size and significance of the financial sector and the importance of the flow of credit to the wellbeing of the Australian economy.

It’s all about getting the balance right with quality products and services being provided in a competitive environment where the behaviour, practices and culture of the sector are consistent with the law and community expectations.

This is what guides us as we continue to implement the largest and most complex set of financial sector reforms Australia has seen in 30 years.

We will do our part and the Australian people expect the financial services sector to do their part too.