Ferguson: ASIC boost no substitute for Royal Commission

From the always excellent Adele Ferguson who exposed much recent banking malfeasance:

To get to the root of unethical conduct requires more than creating a strong regulator. It requires a systemic review, which would look at vertical integration, whistleblower legislation, a review of remuneration structures, a review of the many compensation schemes in place, as well as a compensation scheme of last resort.

Many of the scandals, exposed in Fairfax Media, exposed systemic wrongdoing. They came to light as a result of whistleblowers, some who paid a high price for their honesty including termination and/or smear campaigns.

The various scandals showed how thousands of customers lost their life savings, either through unscrupulous financial advisers or by having legitimate life insurance claims rejected or delayed by claims managers who operate in a culture that puts profit before people.

Many of these victims couldn’t afford lawyers and went to FOS to lodge a complaint. The FOS, which is funded by the industry, has a number of shortcomings, not least of which is the compensation caps and the length of time it takes to review claims.

Treasurer Scott Morrison committed to reviewing these caps, along with a proposal to establish an expert panel to consider merging dispute resolution schemes. But what about the cases where the FOS rules in favour of the consumer but the financial institution is unwilling or unable to pay? It is why a compensation scheme of last resort needs to be introduced.

Precisely. Refunding ASIC is politicising the issue not having a Royal Commission. Why pay the same regulator that failed more? Why give the same boss of that same failed regulator (who was a star in The Big Short) a contract extension instead marching orders?

Why put the solution before the problem is properly defined and only after the Opposition has made it an issue at all? Politics of course.

Meanwhile, at The Guardian it gets worse:

The Turnbull government’s plans to shift the Australian Securities and Investments Commission onto a user-pays funding model will fail to fix the poor conduct plaguing the financial industry, a former Asic chief economist has warned.

Economist Alex Erskine, who was Asic’s chief economist between 2007 and 2013, has also warned the user-pays model will increase the likelihood that the regulator may be “captured” by the banks it is supposed to be regulating.

The Turnbull government announced sweeping reforms to Asic on Wednesday, promising to boost the regulator’s surveillance powers with a multimillion-dollar technological upgrade that will restore some of the funding stripped in Tony Abbott-era cuts.

Alex Erskine is an excellent economist and policy-head.

Another Turnbott clangor.

Comments

  1. pyjamasbeforechristMEMBER

    Hey Labor, take it up a notch and make it a Royal Commission into the Banks AND their regulator ASIC both have failed in my view.

    • Not only look at ASIC oversight of the banks but APRA as well.
      The terms of reference of any RC into the banks could also ask the question –
      Why isn’t AML legislation being applied to the banks biggest money laundering customers – the RE industry?

  2. The Royal Commission, and a new regulatory body to deal with white collar financial crime. ASIC is a forms and regulatory body, it probably should be left alone to do this well.

    How many banking executives have been punished as they feed debt into the financial planning fraud schemes over the last ten years? Margin schemes, capital protection schemes, forestry/agri schemes etc etc they all have bank funding that sits conveniently one step from the fraud.

    • I don’t think anyone really cares that much. It’s a bit like worker exploitation. Occasionally the ABC and Fairfax will spit out a good story, there will be a few days of outrage, but nothing will change.

  3. The two options being offered are totally different, one intends to investigate and report on a dysfunctional fraudulent system with a view to creating a system that reflects current and future needs, including economic effectiveness, efficiency and able to pursue just outcomes such as prosecutions of corporations and individuals, and settling disputes.

    The Morrison offering is a patch-up job that will do nothing meaningful, and that is of course its purpose.

  4. This should come as no surprise to anyone. http://www.theguardian.com/business/2016/apr/21/former-asic-insider-says-turnbull-governments-user-pays-plan-will-backfire?CMP=share_btn_tw

    The Turnbull government’s plans to shift the Australian Securities and Investments Commission onto a user-pays funding model will fail to fix the poor conduct plaguing the financial industry, a former Asic chief economist has warned.

    Economist Alex Erskine, who was Asic’s chief economist between 2007 and 2013, has also warned the user-pays model will increase the likelihood that the regulator may be “captured” by the banks it is supposed to be regulating.

    And further down…here we go.

    Steven Munchenberg, chief executive of the Australian Bankers Association, says he knows few details about the way the user-pays model will work.

    “We accept the model in principle, [but] obviously with these sorts of things the devil is in the detail,” he said.

    “We’ve always been concerned about how it’s going to apply, and it has always raised questions in our minds about well, if we’re paying, how can we have a guarantee that the regulator will use those funds efficiently?”

    • This is obscene. It is the only way I can effectively describe this. The fox is well and truly guarding the hen house.

      They’re worried that the regulator won’t use the funds efficiently? LMAO

      Duddles has it right.

  5. royal commission should primarily investigate role of regulator (ASIC) in the behaviour of banks. Clearly the very fact that these things are happening under the watch of the regulator means that the regulator is not able or capable of doing regulation so they have to be investigated – and that clearly cannot be done by themself.

    • Rent Seeking Missile

      Precisely.

      If there is a problem with conduct at the banks, then there is also a problem at the regulator charged with supervising the conduct at those banks.

  6. Today's Empire Tomorrow's Ashes

    Again you guys are worrying yourselves up the beanstalk.

    Greg Medcraft was on Radio National with the ever accommodating Fran Kelly and in response to her question re: regulatory capture – “Ah, no Fran [we won’t be captured].”

    So, you see, nothing [nothink if you live in NSW, what is with that?] to see here.

    It’s all shtum at ASIC.

  7. moderate mouse

    ‘Alex Erskine………has also warned the user-pays model will increase the likelihood that the regulator may be “captured” by the banks it is supposed to be regulating.’

    Increased from 100% to what exactly? They are already more captured than one of Christian Gray’s girlfriends, and are as afraid of a Royal Commission as the banks are. Make no mistake, ASIC is the worst kind of regulator – not only captive to, but in thrall of those firms it is supposed to regulate.

    • All our public financial institutions have been captured to varying degrees. They are now mostly facilitation tools for the large firms/corporates in the relevant area.

  8. Oh just move towards taxpayer-funded elections.
    I bet the Tories are sick of being puppets also!

    Are they going to do a Royal Commission into why AUS is worse than UK on the corruption index.