This year has seen constant criticism of the treatment of consumers by banks, insurers and financial advisers.
The theme has continued with the publication of the First Report on the Review of the Four Major Banks by the House of Representatives Standing Committee on Economics.
The Committee’s principal recommendation was to establish a Banking and Financial Sector Tribunal by 1 July 2017 to handle complaints from consumers and small businesses. The Tribunal would replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
The Labor Party and the Greens dissented and continue to press for a Royal Commission into the banking sector.
The Government has not responded yet.
The review of the financial system’s external dispute resolution and complaints framework has not yet reported.
The Committee’s other focus was making bank employees responsible for licence breaches and misconduct.
Whilst the committee did not recommend adopting the UK Senior Managers Regime, the committee’s recommendations included:
Licence Breach reporting
The Committee recommended that by 1 July 2017, the Australian Securities and Investments Commission (ASIC) require Australian Financial Services License holders to publicly report on any significant breaches of their licence obligations within five business days of reporting the incident to ASIC, or within five business days of ASIC or another regulatory body identifying the breach.
The public report should include:
- the names of the senior executives responsible for the team/s where the breach occurred; and
- the consequences for those senior executives and, if the relevant senior executives were not terminated, why termination was not pursued.
Wealth management misconduct
The committee recommends that the Australian Securities and Investments Commission (ASIC) establish an annual public reporting regime for the wealth management industry, by end-2017, to provide detail on:
- the overall quality of the financial advice industry;
- misconduct in the provision of financial advice by Australian Financial Services Licence (AFSL) holders, their representatives, or employees (including their names and the names of their employer); and
- consequences for AFSL holders’ representatives guilty of misconduct in the provision of financial advice and, where relevant, the consequences for the AFSL holder that they represent.
The committee recommends that the Government amend relevant legislation to give the Australian Securities and Investments Commission (ASIC) the power to collect recurring data about Australian Financial Services licensees’ Internal Dispute Resolution (IDR) schemes to:
- enable ASIC to identify institutions that may not be complying with IDR scheme requirements and take action where appropriate; and
- enable ASIC to determine whether changes are required to its existing IDR scheme requirements.
The Committee made a general recommendation that competition in the banking sector be reviewed but no specific changes were proposed other than in relation to licensing of new banks and data sharing (perhaps as a prelude to bank account portability).