As a result of a recently-concluded review into the capability of the Australian Securities and Investments Commission (ASIC) – and perhaps at least partially in response to the federal Opposition’s calls for a Banking Royal Commission, the federal government has agreed to finding ways to improve the understanding of ASIC’s role and the strategic oversight of ASIC to better manage stakeholder expectations, announcing a $127.2 million reform package to equip ASIC with stronger powers and funding to enhance surveillance capabilities.
The reform measures comprise the Turnbull Government’s response to the ASIC Capability Review, commissioned in July 2015.
The five recommendations to government will be immediately implemented. These focus on governance, recruitment, annual performance discussions with the Minister and most importantly, removing ASIC from the Public Service Act.
The Government will invest $61.1 million to enhance ASIC’s data analytics and surveillance capabilities as well as modernise ASIC’s data management systems. An additional $9.2 million will also be made available to ASIC and Treasury to ensure they can implement appropriate law and regulatory reform.
The Government is also providing ASIC with $57 million to enable increased surveillance and enforcement on an ongoing basis in the areas of financial advice, responsible lending, life insurance and breach reporting.
“The Government has been going through an orderly and methodical process assessing how we can further strengthen the powers and the resources of the corporate regulator,” said Finance Minister, Mathias Cormann, speaking on ABC radio after the announcement.
“It is something that we have been working our way through in recent months, to ensure that ASIC has got the appropriate powers and adequate resources to do its job.”
The additional funding will be user-pays
Rather than coming directly from taxpayers, the additional $127 million will be funded by industry – that is, the financial institutions. To quote directly from the government’s fact sheet:
“Industry funding ensures that the costs of regulation are borne by those entities that have created the need for it, rather than ordinary Australians who already tend to bear the brunt of financial sector misconduct.
Industry funding will also establish price signals to drive economic efficiencies in the way resources are allocated within ASIC and improve ASIC’s transparency and accountability.”
Does the ASIC review negate the need for a Royal Commission?
The federal government has been under pressure from the federal opposition to call a Royal Commission into banking practices, a call that was refuted by Minister Cormann on radio.
“Some people seem to think that a Royal Commission is able to do something which it is not. A Royal Commission is not able to prosecute wrong doing. A Royal Commission essentially would be a repeat of various inquiries that have been taking place in the past,” he said.
“If we now started a Royal Commission, it would go for a couple of years. It would undermine confidence in the banking system.”
Industry response to the ASIC overhaul
Industry response to the announcement of additional funding has primarily been positive, with ASIC itself welcoming the reforms, along with the Australian Bankers’ Association, the Customer Owned Banking Association, CPA Australia, the Australian Institute of Superannuation Trustees (AIST), Consumer Action Law Centre, the Insurance Council of Australia (ICA), Council of the Ageing, and the Association of Superannuation Funds of Australia (ASFA). You can read details of their various responses here.