Government response to the Report
The Government responded by agreeing to take action on all 76 recommendations set out in the Report and, in a number of areas, claims it will go further. The Government is focusing on restoring trust and delivering better consumer outcomes, while maintaining the flow of credit and continuing to promote competition.
At the time of writing, the Government has announced the following actions:
setting up an industry-funded compensation scheme of last resort. This involves expanding the powers of Australian Financial Complaints Authority (“AFCA”) so that compensation can be awarded for successful claims going back 10 years;
compensating individuals who had a prior unpaid determination in their favour by the predecessor bodies of AFCA. This will see almost 300 consumers receive compensation totalling around $30 million;
extending the jurisdiction of the Federal Court to cover corporate criminal misconduct, which will expedite cases that are considered by state courts; and
commencing a capability review of the Australian Prudential Regulation Authority (“APRA”) in 2019, with further capability reviews being conducted every four years.
Financial system regulators
In the wake of the Report, the Government has taken action to increase the capabilities, powers and funding of financial regulators. Additional funding of $170 million has been provided to Australian Securities and Investments Commission, APRA, the Commonwealth Director of Public Prosecutions and the Federal Court to ensure regulators are adequately resourced to deal with misconduct within the financial services industry.
The Government has announced they will strengthen regulator powers by:
clarifying regulatory roles and powers of ASIC and APRA in superannuation, with ASIC becoming the primary conduct regulator;
ensuring regulators have access to appropriate powers by creating civil penalties for specific breaches of the law for superannuation trustees and directors;
creating an independently-chaired regulator oversight body; and
conducting regular capability reviews of both financial regulators, with a capability review of APRA commencing in 2019.
What’s next?
While the Government has stated that it will ‘take action’ on all 76 recommendations made in the Report, it is important to remember that a federal election will occur this year and is expected to be held in May. With limited sitting days for Parliament left before then, it is likely that most of these recommendations will not be legislated on, before the upcoming election. The Opposition has indicated that it accepts all of the recommendations made in the Report “in principle”, but has not released a formal response to the Report at the time of writing.
It seems likely that the recommendations made in the Report will become a debated issue for both the Government and the Opposition as the election looms closer. Therefore, whether the recommendations are implemented through legislation, and what form they eventually take, remains to be seen.
If you have any questions about the implications of these recommendations please contact Hillary Ray.