"The Australian community expects that banking executives are held to account when they do wrong" says CHOICE CEO Alan Kirkland.
"The Federal Government promised action to hold executives accountable after the Royal Commission but the proposed reforms are missing requirements for fair treatment of customers."
CHOICE is calling on the Government to add a basic fairness accountability obligation in the FAR regime.
"Fairness is missing from the Government's proposed executive accountability reforms. Executives will be obliged to ensure the prudential standing of the business but there is no mention of treating customers fairly.
"Banking executives must be held accountable for how they treat their customers."
"This should include accountability for selling harmful products, such as the flogging of insurance products that customers could never claim against, as we saw before the Royal Commission.
"If designed correctly, the new Financial Accountability Regime could be a game changer for corporate culture in Australia's financial services sector. That is in the interests of financial institutions and their customers.
"If we get this right, banking executives will be on notice. If they break the law, they will personally face the wrath of regulators empowered with a full suite of measures - including large civil fines, disqualification and deferred remuneration."
"A well-designed FAR regime will be the defining legacy of the Banking Royal Commission. Failure to implement this effectively, due to industry lobbying and pressure would be a clear violation of Commissioner Hayne's vision," says Alan Kirkland.
CHOICE is calling on the Federal Government to strengthen the proposal in two important ways. By adding a fairness obligation and by making sure deferred remuneration meets global best practice.
"The deferred remuneration obligations must be significantly strengthened and brought in line with global best practice. It is very concerning that the proposed obligations are weaker than the current requirements set under the Banking Executive Accountability Regime (BEAR)."
"We want our financial institutions to employ senior executives who are motivated by the highest standards of integrity, not those who are seeking the least restrictive incentive payments."
Media contact: Jim Hook, 0430 172 669, email@example.com
CHOICE joined forces with Financial Counselling Australia, Financial Rights Legal Centre, Super Consumers Australia and Consumer Action Law Centre in a submission to the Federal Treasury. A copy of the submission can be found here: http://bit.ly/2UKCdIi
This reform will implement five important recommendations of the Banking Royal Commission:
- Recommendation 3.9 - extending the BEAR to all RSE licensees
- Recommendation 4.12 - extending the BEAR to all APRA-regulated insurers
- Recommendation 6.6 - joint administration of the BEAR
- Recommendation 6.7 - statutory amendments of the Banking Act 1959
- Recommendation 6.8 - extending the BEAR to all APRA-regulated financial services institutions
CHOICE surveyed 7,400 supporters in May 2019 - 93% of them want to see stronger laws to hold banking bosses to account. Of all the reforms promised in the Royal Commission, they rated it the most important.