Budget Breakdown Part 2 - A Fairer Banking SystemMon, 5 Jun 2017
“Let’s Keep the Bastards Honest”
To paraphrase the words of the late Don Chipp may raise a few eyebrows, but if the shoe fits. .. Although the founder of the Democrats was referring to his political counterparts, it is somewhat apt, given the Federal Budget handed down last month, has gone, in some ways to addressing the discontent, dissent and malcontent that many Australians feel towards the major banks.
In recent years, they, (banks), have been plagued with controversy over what many construe as greedy corporations bad behavior. Behavior that has seen many of their customers begin to view them in less than savoury terms. Money making giants, their sole interest being to ensure that their executives pat each other gregariously on the backs, whilst fattening their wallets with even bigger bonuses, driving up the share price – all at the expense of their loyal customers.
A dark sales-at-any-expense culture existed long enough to allow these financial planning and insurance scandals to develop and, whether it be through ignorance or simple in-action, senior banking leadership did not act fast enough, nor with enough brute force to hold those individuals accountable.
As a result, the banking fraternity has engendered continuing controversy, which has encouraged stronger government intervention.
Banking Executives More Accountable
Under the new regime, all senior-banking executives have to be registered with APRA. Furthermore, the regulator will have the right to remove, or disqualify executives who fail to meet expectations, ergo, they will no longer be fit to serve in senior banking roles.
New civil penalties of up to $200million for ADI’s that fail to monitor the suitability of their executives. Government will mandate that 40% of an executives variable remuneration, (bonuses,) be deferred for a minimum period of 4 years to allow suitable time for the impact of their decisions to materialise.
To implement these new measures, the Government will provide $4.2million in funding over 4 years, plus an ongoing $1million to APRA to ensure the these new measures are adhered to.
Improved Dispute Resolution for Customers
AFCA,(The Australian Financial Complaints Authority.) will be a one-stop shop to deal will all financial disputes, including superannuation. They will be able to provide free, rapid and binding resolutions for disputes of a higher value than the current system provides for. All financial firms will be required to be members and the body will be completely funded by industry
The good news for consumers and small business? From July 2018, if they have suffered a financial loss they will be able to have their situation reviewed by an independent board and the decisions will be binding.
As a former employee for one of the majors, I am happy to report that although sales targets were a predominant part of my role, management were not pushing us to achieve these targets to the detriment of our clients. But, as we well know, there has been enough bad behavior in the industry to warrant these changes.
These new reforms and control measures will have a positive effect. They will influence customer-centric focused behavior.
The financial services sector impacts us all, for this integral part of the national economy to work effectively, Australians need to have confidence that the providers will continue to serve their clients interests rather than just their own.
Keeping the Bankers Honest may very well be just the thing this nation needs.