In delivering his second reading of the budget on Tuesday, the Treasurer announced that the government will establish the Australian Financial Complaints Authority, which he described as “a simpler, more accessible and more affordable one-stop shop for Australians to resolve their disputes and obtain binding outcomes from the banks and other financial institutions”.
Further, he added that a new banking executive accountability regime will be introduced, which will require all senior executives to be registered with APRA.
“If in breach, they can be deregistered and disqualified from holding executive positions, and be stripped of their significant bonuses,” the Treasurer said.
“Banks will also be held to account if they try and hide misconduct by executives with new mandatory reporting requirements. If banks breach misconduct rules, they will also face bigger fines starting at $50 million for small banks and $200 million for large banks.”
The implementation of a more open complaints mechanism for the financial services sector is something Adviser Ratings has been campaigning for, according to its founder and managing director Angus Woods.
Speaking to Mortgage Business, Mr Woods explained: “You’ll notice that the US had a complaints regime in place for many years. It certainly has made the availability of information to consumers much more transparent, and improved the ability for consumers to make much more informed decisions."
Mr Woods highlighted that it is important for such an open complaints authority to be handled well, insofar as filtering out spurious complaints, adding that he believes it could potentially dispel calls for a royal commission into the financial services industry.
“I think that the moment you become much more accountable in the eyes of the public through an open complaints regime, it does change behaviour. I think there are numerous psychological and academic research that supports that finding,” he said.
“From that perspective, I believe something like that will quash any calls for a royal banking commission.”
He concluded: “I think it’s a positive step. If we can be forerunners in this respect, I think it really will go towards improving banking culture.”
Similarly, the Financial Services Council (FSC) said that the mechanisms represent “significant new consumer protections”, which should “end all calls” for a royal commission.
FSC CEO Sally Loane said: “The government has laid out a blueprint for strengthening consumer trust in the financial services industry. The FSC calls on all parties to finalise this unprecedented and stringent package of reforms so that we can bring an end to the politicisation of the financial services industry.”
However, the FSC noted that the new measures should not be finalised without further consultation.
“These changes will have significant ramifications for the industry and we expect to be fully consulted before implementation,” Ms Loane said.
Opposition leader Bill Shorten first called for a royal commission into the major banks in April last year.
[Related: Royal commission calls gain momentum]