In the wake of the Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry, the Government has provided financial regulators with a suite of new funding in the 2019 Budget.
Treasurer, Josh Frydenberg announced that new funding to the Australian Securities Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA) and the Federal Court will ‘strengthen the financial system and deliver better outcomes for all Australians’.
The Federal Government will spend $640 million on financial regulators to help build trust in the financial sector and ensure financial system regulators have appropriate resourcing to expand their capability to deliver on their new responsibilities, enforcement and supervision . This is in represents the Government’s response to the Royal Commission that ASIC remains appropriately resourced in order to take on new responsibilities and work on referrals provided to it after the Royal Commission’s findings were handed down.
The 2019 Budget provides $400 million for ASIC for an accelerated enforcement strategy and enhanced on-site supervisory capability for monitoring large institutions to deliver on ASIC’s expanded role in relation to superannuation.
A similar funding arrangement will apply to APRA with $56.9million to be spread over the next three years . This will be dedicated towards strengthening APRA’s supervisory and enforcement activities, including those in relation to governance, culture and renumeration, as well as enhancing APRA’s regulation of superannuation funds.
The Federal Court will also receive a boost with $35 million allocated to expand the jurisdiction of the Federal Court to include corporate crime. The funding will also provide the court with two new judges, extra staff and additional courtrooms to deal with upcoming cases expected to be referred by ASIC to the DPP in the wake of the Banking Royal Commission.
The Budget also provides $2.8 million to the Australian Financial Complaints Authority (AFCA) to consider eligible financial complaints dating back to . This time frame is an improvement on the current scheme which only allowed AFCA to consider matters which occurred in the past six years, or in the case of a complainant who has been through a financial firms’ internal dispute resolution process, this has been reduced to two years. However, there is still uncertainly as to who might qualify as ‘eligible’, AFCA is expected to announce guidance on these matters before 1 July 2019.
The cost for these reforms will be partially offset by revenue received through ASIC’s industry funding model and increases in the APRA Financial Institution Supervisory Levies.
To ensure these reforms achieve lasting change in the sector, Treasury has been allocated a new taskforce – Financial Services Reform Implementation Taskforce. This taskforce will undertake a review of the Royal Commission reforms as well as coordinate reforms efforts between ASIC, APRA and other agencies.
What does this mean for financial service providers?
The Government has implemented these measures of increased funding to address a lack of confidence in the banking and financial sector after the Royal Commission.
After the damning findings of their lack of supervision of the financial sector, with new roles and an increased budget, ASIC and APRA, along with other regulatory bodies should be able to provide confidence and peace of mind for consumers wishing to invest in the financial services .
Financial services institutions should take note of the new responsibilities of financial regulators and ensure their compliance with the appropriate instruments.
However, while industry has welcomed additional funding for the financial regulators and additional resources for the Federal Court, there is some concern about the increases in ASIC’s user pays funding model.
The Federal Government has moved the cost of ASIC and other financial regulatory bodies from the taxpayer to the industries it regulates. Increases in the model could see costs passed on to financial services institutions as well as consumers.
The report of the new Financial Services Reform Implementation Taskforce, which is due in three years’ time will be able to provide some evidence as to how successful these reforms have been in addressing the recommendations of the Royal Commission.
Are these reforms guaranteed?
With an election scheduled to be held before 18 May, and polling suggesting the Government won’t be returned to office after the election there is no guarantee that these measures will be implemented. However, in the wake of the Royal Commission reforms in this area it would appear to be bipartisan. Labor has stated that it will implement 75 of the Royal Commission’s recommendations and will establish a victim compensation package for those effected by financial misconduct in the banking and financial sector.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.