Day 413: 'Far-reaching implications'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 413.
Today in summary: Treasurer Josh Frydenberg pledges “in-principle” intention to adopt all recommendations of the banking royal commission final report; the royal commission media lockup turns into a debacle; and corporate regulator ASIC may be the first out the gate with policy changes that give the industry more clarity on rules. And we speak to the experts on what should be done to fix our regulatory regime.
-- Alex
Current banker panic level: 🤢 🤮
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Treasurer Josh Frydenberg this afternoon received the final report from the banking royal commission in person from commissioner Kenneth Hayne, who was clearly thrilled to be posing for a media moment with Frydenberg.
Ever had an awkward Friday afternoon meeting? Josh Frydenberg and Kenneth Hayne sure have. https://t.co/EpQEgYCmRVFrydenberg, like Prime Minister Scott Morrison, has pledged the Coalition’s “in-principle” intention to adopt all recommendations of the banking royal commission final report, with the caveat that financial market stability and credit flow are key concerns. The Australian is reporting that government is also drafting terms of reference and seeking expert panel members for a competency review of banking regulator APRA, which came under fire during the royal commission for weak responses to misconduct.
The Finance Sector Union has been denied access to the royal commission media lockup, despite lobby groups, such as the Australian Banking Association, representing the banking sector being given access. They, like the banks, are underwhelmed that they will not be present to get a first look at the historic report. And the banks are still smarting that they won’t be allowed an early look. Furious in fact, expressing “deep concern that they have not been invited”.
Corporate regulator ASIC today confirmed it would clarify responsible lending obligations, with speculation that this may include a move toward an altered version of the controversial household expenditure measure (HEM) as a firm recommendation. ASIC will release a revised draft "Regulatory Guide 209" after the royal commission final report is released and is likely to be one of the first policy responses by regulators to the final report. The Australian Financial Review’s banking senior reporter James Eyers writes:
“With the final report of the banking royal commission, to be released on Monday, expected to provide a verdict on whether banks are doing enough to check customers' living expenses before they lend, banks want more guidance from the Australian Securities and Investment Commission to avoid prosecutions.”
We’ve got more on what’s needed to create an improved regulatory environment here. Former APRA lawyer Andrew Schmulow says a principles-based approach to regulation would lead to more convictions. Though he’s not hopeful APRA will agree.
“I dare say there are probably religious cults that are less steeped in group think than APRA.”
The Commentariat
Treasurer Josh Frydenberg writes in the Australian Financial Review that while it is important to bring the banks into line and restore trust, we still need to lend, lend, lend because total credit is below the 10-year average. He also plugs some new legislation the government has before parliament.
“In responding to the royal commission, the government will also consider the broader implications for the provision of credit. We must ensure affordable and accessible access to finance for households and businesses. The free flow of credit is critical to the health of the economy.”
Former Productivity Commission and OECD regulatory expert Sue Holmes drills down in the AFR into the causes of banking misconduct, arguing that simply identifying, describing and punishing the behaviour won’t get us very far.
“The Hayne royal commission exposed a good deal of misconduct in the financial sector but very little convincing analysis of the causes of that misbehaviour, including from people who should know.”
The Australian’s Joyce Moullakis defends the nation’s mortgage broking industry, arguing it has “injected much-needed competition into theA $1.7 trillion home loan market”, but laments that is could be blown out of the water by the banking royal commission’s recommendations.
“Any sweeping calls by commissioner Hayne to scrap or change the entrenched commission-based pay model would have far-reaching implications for mortgage brokers and the industry’s economics.”
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