Turnbull’s financial services regulatory legacy
Few governments can match the Turnbull administration for delivering increased regulation to the financial services industry.
By the time the current Coalition Federal Government calls the next Federal Election it will be possible to look back upon its two terms in Parliament and reflect upon the additional layers of financial services regulation which have been put in place.
Nobody has yet provided a definitive assessment of how much the additional layers of regulation have added to the costs imposed on the financial services industry, but the recently-released half-year results of the major banks and publicly-listed financial firms suggest that the impact on their balance sheets has been substantial.
On top of this the banks and other financial services entities must now add the costs entailed in the recommendations pending from the Productivity Commission (PC) and the Joint Parliamentary Committee on Corporations and Financial Services and the demands of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the imposts which might flow from any recommendations that the Royal Commission might make.
The bottom line is that the financial services industry has been the victim of political expediency and ineptitude – the actions of a Government which devised new regulations in a bid to avoid holding a Royal Commission but ended up having to hold one anyway.
As is always the way in such circumstances, the Government would not have sensed any reluctance on the part of the financial services regulators in taking on more powers – something evidenced by the attitude of the former Australian Securities and Investments Commission (ASIC) chairman, Greg Medcraft, and, more recently, by his successor James Shipton.
Indeed, Shipton appeared to set the tone for his chairmanship when he used his opening address to his first ever appearance before the Joint Parliamentary Committee on Corporations and Financial Services to state that ASIC’s regulatory toolkit should be as complete as possible.
Given the increased powers already granted to ASIC alongside the move to an industry funding model, Shipton’s comments would doubtless have created some unease for financial services chief executives and others who are being asked to foot the bill.
The bottom line is that layers of regulation and the building of regulatory empires will not fix the problems of the financial services industry. The answer lies in better-targeted regulation.
It is in these circumstances that, once the Royal Commission has completed its work, an urgent regulatory stock-take is needed to ensure that the debris of political expediency are moved aside to enable a more focussed, effective and affordable approach.
There exist no guarantees that the increased levels of regulation will actually prevent a repeat of events such as the collapse of Storm Financial or the giving of substandard advice within a major banking organisation.
It seems entirely more likely that positive change will be driven by higher educational and professional standards.
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