Money Finance News ‘ASIC is letting the banks write their own rules’
Updated:

‘ASIC is letting the banks write their own rules’

steve munchenberg
The ABA, headed by Steve Munchenberg, is making a splash in 2017. Photo: AAP
Share
Tweet Share Reddit Pin EmailComment

The big banks are being given a free hand to reshape the industry after years of scandals, a senior banking expert has warned.

In recent days, the Australian Bankers Association has embarked on a high-profile campaign, complete with full-page newspaper ads, to market its proposed changes to its own sector.

These proposals are the culmination of several months of internal reviews, and are the industry’s response to countless reports of misconduct that sparked calls for a royal commission.

patrick mcconnell
Dr Patrick McConnell says ASIC is vacating the field. Photo: Cafral

“We have heard the concerns of Australians and we are committed to taking action so that banking with all of us is a better experience,” Andrew Thorburn, chairman of the Australian Bankers Association and CEO of the National Australia Bank, said in a statement.

As proof of their commitment, the banks pointed to their $1 billion investment in Australia’s new super-fast payments system (despite the fact work on this system started back in 2014).

The ABA also promised: to employ customer advocates; more whistleblower protections; public naming and shaming of dodgy financial advisers; a simpler, better-explained complaints system; and a new industry-funded compensation scheme for victims of poor financial advice.

Dr Patrick McConnell at Macquarie University — a banking regulation expert who advised firms in the US, Europe and Australia for 30 years — said the industry is trying to “get control of the levers of power” so it can rewrite the rules to favour its members.

“The ABA are addressing some of the major issues, but from the perspective of what’s best for the banks to cover their arses, not what’s best for the consumer, the banking environment and the economy,” he told The New Daily.

“They’ve got a very vested interest and they’re pushing it. I don’t criticise them for doing it – I criticise ASIC for letting them.”

ASIC, the corporate and financial regulator, has ceded the field to the banking lobby because it is “spread too thin”, he said. “They’ve handed over the agenda lock, stock and barrel to the ABA.”

‘Treat the cause not the symptoms’

Dr McConnell took particular issue with the new consumer advocates, who will “prioritise and escalate complaints”, according to the banking lobby.

Shane Tregillis. Photo: Getty
The Financial Ombudsman Service, headed by Shane Tregillis, and several other external dispute resolution services are expected to be rolled into one. Photo: Getty

He feared these new bank employees would be used to keep complaints internal, away from the eyes of regulators and the media, rather than having them dealt with externally by an independent body.

Dr McConnell gave the example of the PPI scandal in the UK, where thousands of complaints about improperly sold insurance were dealt with internally and separately. As a result, the underlying cause did not come to light for many years.

“The customer advocate should be much more proactive in looking to head off problems to start with. They should take a look at a new product and say, ‘It’s going to give you problems here, here and here for customers’. If the product is designed well, the number of complaints will be lower.”

In the PPI scandal, British banks pressured customers to buy insurance to cover their mortgage or credit card payments if they fell ill or lost their jobs. The insurance was highly lucrative for the banks and a bad deal for customers. It was even sold to thousands of the self-employed and those with pre-existing medical conditions, despite the fact that neither could claim.

Its members are supporting the Turnbull government’s proposal of a ‘one-stop shop’ external dispute resolution system, which is expected to combine several existing complaints bodies into a single scheme.

There are currently four complaints forums: the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO), the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), and the Superannuation Complaints Tribunal.

Comments
View Comments