Treasurer reveals ‘critical’ considerations of RC response

Josh Frydenberg MP was speaking at the Australian Finance Industry Association (AFIA) conference when he told delegates that Australia has “one of the strongest and most stable banking and financial services industries in the world performing a critical role in underpinning the Australian economy”.

Noting that banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies and the superannuation industry held a combined $7.9 trillion in assets and that the system, as a whole, had contributed $163 billion to the Australian economy in 2017–18 (around 9 per cent of annual GDP), the Treasurer said that “because of the very scale and wider significance of the financial sector, it is essential that it regain the trust of the Australian public”.

The Treasurer outlined that the government had undertaken a range of initiatives in recent years to ensure that the financial system “operates in interests of those it serves — consumers, businesses and the wider economy”, including the Financial System Inquiry, a “significant number of subsequent reviews and inquiries” and changes to legislation, such as comprehensive credit reporting, the Banking Executive Accountability Regime and the establishment of the Australian Financial Complaints Authority.

Mr Frydenberg noted that the government recently provided additional funding to ASIC, APRA and the Commonwealth Director of Public Prosecutions and the Federal Court to deal with “additional enforcement action relating to misconduct in the financial services sector”, off the back of the ongoing financial services royal commission.

“As I said when the interim report of the financial services royal commission was released, it shone a very bright light on the poor behaviour of the financial sector.

“Greed was singled out as the motive, with short-term profits pursued at the expense of basic standards of honesty. Clearly, this cannot be allowed to continue,” the Treasurer warned.

The MP added that he was “determined to take all necessary steps to ensure that these issues are addressed and do not recur” but would be particularly focused on ensuring four key outcomes:

• consumer and business access to financial services,
• stability of the financial system,
• competition, and
• economic growth.

“It is critical that the government response is mindful of these wider implications,” Mr Frydenberg said.

He concluded: “The government understands that a stable financial system — services that Australians can have confidence in — underpins our economy.

“We’re taking action to better protect consumers, to ensure banking executives are held to account where they fail to comply with the law and to ensure regulators have the resources and powers they need. And finally, we’ve announced significant measures to enhance small business access to finance and cut red tape.

“Taken together, these measures form part of the government’s ongoing plan for a stronger economy.”

Mr Frydenberg made the comments to the AFIA conference on Tuesday (20 November), on the second day of the royal commission’s seventh round of hearings.

The commission heard from the CEO of the Commonwealth Bank of Australia (CBA), Matt Comyn, and chair Catherine Livingstone, as they were called to give evidence on remuneration, its reliance on the Household Expenditure Measure for home loan applications and how the bank approached its responsibilities relating to Anti-Money Laundering and Counter-Terrorism legislation.

The Treasurer’s comments follow on from similar remarks made by Assistant Treasurer Stuart Robert MP, who told attendees of the Finance Brokers Association of Australia’s National Industry Conference that the federal government would consider royal commission recommendations together with those put forward by the Productivity Commission, adding that these two “major lines of inquiry that I suggest will usher in a new wave of reform, mostly led by cultural change rather than regulatory change”.

[Related: Reform to focus on culture, says Assistant Treasurer]