In a letter to the Australian Banking Association (ABA), the Australian Securities and Investments Commission (ASIC), and the Australian Prudential Regulation Authority (APRA), Mr Frydenberg directed the organisations to implement Commissioner Kenneth Hayne’s recommendations from the final report directed at them.
The Treasurer sent out three letters to the heads of the organisations and made it clear that the government wanted to see lasting change within the sector.
“We will establish a follow-up independent inquiry, commencing in three years, to assess changes in industry practice and consumer outcomes since the royal commission,” Mr Frydenberg said.
Alongside implementing recommendations, the Treasurer underlined the importance of ASIC changing its approach to enforcement, particularly shifting to a “why not litigate” stance.
“I am aware that change is already underway – including through the establishment of the Office of Enforcement within ASIC, the move to a ‘why not litigate’ approach to enforcement and the introduction of initiatives such as close and continuous monitoring – to more intensively supervise the sector,” Mr Frydenberg wrote.
The Treasurer committed to ASIC its continued support in providing new powers, expanding its role as a super regulator, removing barriers and strengthening penalty provisions.
“The government remains committed to ensuring that ASIC has the resources it needs and will give further consideration to ASIC’s resourcing needs as part of the 2019–20 budget,” he said.
ASIC and ABA were also told by Mr Frydenberg to work together to create an enforceable banking code of conduct.
“I also expect the ABA to work cooperatively with ASIC to have the relevant provisions of the banking code approved as ‘enforceable code provisions’ as soon as practicable after legislation providing ASIC with these powers has been enacted,” he said.
In a letter to the ABA, the Treasurer said he expected the banking code to be amended to support more inclusive practices, expand the definition of small business and eliminate default interest from being charged on loads declared to be impacted by natural disasters.
Mr Frydenberg told ABA chief executive Anna Blight that it was imperative that its members commit to putting customers at the heart of their business.
“I ask that you work with your members to take action and truly commit to restoring trust in the financial system. Only strong and decisive action of the kind that leads to lasting change will ensure that the misconduct revealed by the royal commission is not repeated and that the public’s trust is regained,” he said.
Mr Frydenberg also called on APRA to strengthen its regulating and enforcement approach and prompted the authority to act on issues relating to the prudential standards, ADI responsibilities and supervision of regulated firms.
“It is my expectation that APRA will consider seriously the findings that the royal commission has made, echoed in the Productivity Commission’s superannuation inquiry, including whether its supervisory approach is appropriate for its mandate with regard to superannuation,” he said.
The Treasurer reiterated the government’s support for the body and said it would give further powers and funding to the authority as needed.
The letters come as the opposition party has accused the government of not moving fast enough to implement Commissioner Hayne’s findings.
Labor had tried to force parliament to hold extra sitting weeks to pass legislation the dealt with the royal commission recommendations but has been unable to get the support of the crossbench.
[Related: ASIC to update responsible lending guidance]