Call to broaden banks compo scheme

IF the Federal Government sets up a compensation scheme for people ripped off by banks and other financial companies, it should be retrospective, a leading industry lawyer says.

According to industry speculation yesterday, Australian banks are bracing for a new impost to pay for the establishment of a so-called lastresort compensation scheme for victims of financial companies.

Such a “last resort” scheme would typically provide compensation for victims of companies that have collapsed, meaning there are no other avenues of redress.

A leading superannuation lawyer said the most difficult issue facing the Government was whether it would be retrospective.

“It is an important confidence-building measure,” said the lawyer, who declined to be named.

“The question the Government will be grappling with is whether it only covers unpaid losses for the future, or whether it concerns unpaid losses from the past such as (those arising from the collapse of managed investment scheme) Timbercorp.”

Banking industry insiders yesterday said if the Government did announce such a scheme, it would be unlikely to blunt calls for a royal commission into the conduct of the sector.

One source said many of the reputational issues afflict- ing the industry were instead a result of problems such as rogue financial planners.

“It wouldn’t placate (those demanding) a royal commission,” one insider said. A royal commission was “not about banks not paying their debts”.

Federal Treasurer Scott Morrisson this week summoned the chairs of the big four banks into one-on-one meetings. It is believed they discussed what form a last-resort compensation scheme could take.