Tough banks action

THE government which once denied the need for a banking royal commission is now threatening tough action for the sector.

That is the right response to the interim findings of Commissioner Kenneth Hayne.

And it says how much the community’s mood about corporate malfeasance has shifted the will of our politicians to actually do something about banks behaving badly.

It is likely we may not see instant action on what have now clearly been revealed as blindspots and ethical blackholes in our financial system.

The Government will likely want to see Mr Hayne’s full report and recommendations before arriving at specific new policies intended for the finance sector.

But the comments by Treasurer Josh Frydenberg that he is “committed to taking strong action” when asked about forcing the banks to compensate for loss and harm from dodgy loans is a good indicator of where we are heading.

In the interim report Mr Hayne canvassed the idea of giving the financial service watchdog greater powers when ordering banks to pay compensation for loss or harm caused.

The ‘mega ombudsman’ currently has a cap of $500,000 when awarding compensation.

If the speculated reforms are ushered in, a customer could have access to compensation from losses that have resulted from bad loans.

This could include, for instance, compensation for loss of a car or a job related to the bad loan. The devil will be in the detail. And there are more deserving areas of scrutiny than loans. Dodgy fees, for instance, are the source of much of the commission’s worst findings.

But it seems the common ground for all is that the various banking and financial service watchdogs need to be given sharper teeth and need to be emboldened to use them.

Otherwise things will very quickly revert to business as usual and it will be the customers who pay the price.