Day 437: 'Patching up legislation’
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 437.
Today in summary: APRA deputy chairman John Lonsdale used his speech at the Insurance Council of Australia annual forum in Sydney today to tell the insurance industry to be proactive in risk mitigation, rather than waiting to be “dragged into action by regulators”; the Australian Banking Association called for any expansion of the definition of small business, as recommended by the royal commission, to be considered carefully; and the latest edition of the ASX Corporate Governance Principles and Recommendations contains new recommendations to protect whistle-blowers and fight bribery, and the explicit requirement that listed entities act “lawfully, ethically and responsibly".
-- Alex
@AlexESampson
Current banker panic level: 😉🤔🤨
Please don’t keep The Inquisition to yourself. Forward this email to your colleagues and encourage them to sign up for free here.
1. APRA deputy chairman John Lonsdale used his speech at the Insurance Council of Australia annual forum in Sydney today to talk about the process of rebuilding trust in the wake of the banking royal commission. Lonsdale was recently appointed to APRA to conduct an enforcement review of the prudential regulator.
Lonsdale said in APRA’s experience, the general insurance sector was “generally mature, well-run, soundly capitalised and responds promptly and effectively to regulatory principles and requirements”, and rejected the idea that negative consumer experiences detailed in the royal commission were representative of the majority experience. This comes after APRA chairman Wayne Byres last week refused to accept criticism that there had been a lack of action from APRA on financial misconduct.
Lonsdale said:
“Although APRA regards the royal commission as a positive for the financial services sector, the fallout has harmed companies and individuals who were shown not to have met the high standards the community – and the law – rightly expect. General insurers suffered less damage than banks or superannuation licensees, but the industry did not escape unscathed.
Lonsdale did concede that insurers “left themselves vulnerable by failing to mitigate against risks that, in many instances, were well known". He encouraged the sector to be proactive in risk reduction going forward, rather than waiting to be “dragged into action by regulators”.
2. The Australian Banking Association today announced it was yet to decide whether to support the banking royal commission recommendation to change the definition of a small business. The recommendation from Commissioner Hayne called for the definition be broadened from a company with fewer than 100 employees and total facilities of $3 million to a company with fewer than 100 employees and a loan or loans of less than $5 million.
The ABA released a statement saying:
“The royal commission recommendation to expand the definition from total borrowings of a business to an assessment on a per loan basis regardless of the existing borrowings is a very significant expansion on the current definition which the industry believes should be considered carefully before any change is made.”
The Association supported the remaining six recommendations that fell within its remit, including banning overdrafts and dishonour fees on basic accounts and increasing support for farmers. It said many Australians would receive new protections under a revamped Banking Code of Practice, which was approved by corporate regulator ASIC last year, and will be updated with key amendments in response to the recommendations of the royal commission final report.
3. The latest edition of the ASX Corporate Governance Principles and Recommendations, released today, contains new recommendations to protect whistle-blowers and fight bribery, and the explicit requirement that listed entities “instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly". Financial Services Council policy manager Jane Macnamara said the new edition reflected Australia’s growing focus on strong culture, values and accountability in business.
"The FSC and its members recognise the importance of good corporate governance to maintain trust in business and ensure business practices are sustainable over the long term."
The contentious phrase “social licence to operate” has been removed from the latest edition of the ASX Corporate Governance Principles and Recommendations, released today. The phrase was removed amid concern it would have unintended consequences for industries such as liquor, gambling, coal and coal-seam gas. AMP chair David Murray, among others, had been vocal in his opposition of the phrase, saying it was distracting politically correctness. Australian Council of Superannuation Investors chief executive Louise Davidson said the removal made sense from an investor perspective.
Today’s burn prize: Law professors Elise Bant and Jeannie Marie Paterson
🔥🔥🔥
“Patching up legislation, rather than replacing it with something simple, runs the risk of making it worse.”
Writing for The Conversation, Bant and Paterson discuss why the government’s approach of trying to patch deficiencies in the law identified by the banking royal commission will be unsuccessful.
The Commentariat
Former Victorian Premier Jeff Kennett explains in the Herald Sun why humiliating banks promotes instability in the economy. Kennett argues that Labor is chasing votes without a thought to the consequences of its policies, which he believes will undermine banks as key institutions for a functioning economy.
“I support the notion that justice must not only be done but be seen to be done. But as our banks are squeezed by politicians, the people who will be hurt are the families with mortgages, those seeking mortgages and businesses trying to fund their operations and growth.”
This is an introductory service while we’re building a comprehensive daily paid online publication, coming soon.
We’re not here to offer opinion, simply to cut through the noise, and help you make sense of the emerging policy and market trends you need to be across. We call it pure intel. You can read more about us here.