Earlier today, the Australian Federal Government confirmed it would be introducing legislation into Parliament to provide for a Royal Commission into the conduct of banks.
The Terms of Reference (“the Terms”) for the Royal Commission have been released and they are broadly worded.
Specifically, the Terms state the Royal Commission’s powers to investigate the following areas of the banking, insurance and financial services industry:
- poor culture;
- practices not in consumers’ interests;
- poor business activity/behaviour;
- governance practices;
- remuneration and recruitment practices;
- misuse of members’ retirement savings - for example super funds using members’ money for political/union purposes not consistent with the members’ interests;
- redress schemes, industry redress schemes, IDR, EDR (FOS, CIO, SCT);
- codes of practice;
- reviewing the behaviour and powers of APRA & ASIC;
- includes banks, insurers (life & general), super funds (but not self managed super funds);
- must look at the economic impact and international competitiveness of their practices;
- excludes macro prudential policy – for example, compulsory super rates and unpaid super;
- can exclude inquiry into any matters before courts or other inquiries – for example, the current Timbercorp litigation.
We welcome the Royal Commission. It’s an important process that has broad support.
However, we are concerned that the timeframes set out for the Royal Commission may be unrealistic. The Government has stated that an interim report will be filed by September 2018 with the final report to be provided by February 2019.
In practice, such tight timeframes are likely to impact on consumers more than financial services providers given the resource and power imbalance. Further, the tight timeframes may not allow consumers the time they need to prepare for hearings and could cause further stress and lost opportunities to examine all cases.
If this process is not done properly, it will be business as usual for the financial services provider and a large bill for the taxpayer.
Further, there will be a need for consumer representation at the Royal Commission and we are concerned that this need will not be met without adequate funding for legal services and advocacy and the adequate provision of time to consumers to organise their submissions.
We will be monitoring the setup and progress of the Royal Commission into the banking sector very closely.
Today’s blog writer is Principal at Berrill & Watson, John Berrill.