Regime key to banking reforms
THE federal government has moved a step closer to implementing key recommendations of the royal commission into the banks, by releasing draft legislation on Friday.
The draft aims to extend the banking executive accountability regime and ensure consumers can still receive compensation for a financial firm’s misconduct, even if that firm is unable to pay.
In a joint statement, Treasurer Josh Frydenberg and Financial Services and Superannuation Minister Jane Hume said that when enacted the legislation would establish the Financial Accountability Regime and the Compensation Scheme of Last Resort, ticking off seven recommendations made by Commissioner Kenneth Hayne when he handed down his final report in 2019.
“The establishment of the Compensation Scheme of Last Resort will support ongoing confidence in the financial system’s dispute resolution framework by facilitating the payment of compensation to eligible consumers who have received a determination for compensation from the Australian Financial Complaints Authority which remains unpaid,” the ministers said.
“The Financial Accountability Regime will extend the Banking Executive Accountability Regime to all APRAregulated entities and will be jointly administered by APRA and ASIC.
“The Financial Accountability Regime imposes a strengthened responsibility and accountability framework within financial institutions, recognising that decisions taken by directors and the most senior executives of financial
institutions are significant for millions of Australians and the Australian economy.”
The government also on Friday released the Australian Securities and Investments Commission report into the financial service industry’s transition away from grandfathered conflicted remuneration – another recommendation of the commission that came into effect on January 1.
Grandfathered conflicted remuneration refers to a type of fee or benefit paid to a financial adviser that might be expected to influence their behaviour that were allowed to remain when this type of payment was broadly outlawed in 2013.
The report found 96 per cent of grandfathered conflicted remuneration arrangements had been terminated by the end of last year while $266.7m had been rebated to affected consumers, with a further $24.4m predicted to be refunded this year.
Elsewhere, the government has moved to implement recommendations specific to the financial advice industry, introducing the “Better Advice” Bill into Parliament last month. Once law, the Bill will move the Financial Adviser Standards and Ethics Authority’s powers to the Treasurer while creating additional penalties and sanctions for advisers who breach their duties.