Need to know
- CHOICE and a number of allied organisations have lodged a submission with the federal Treasury asking for changes in the Financial Accountability Regime (FAR)
- The FAR aims to hold bank executives responsible for the conduct of the banks they run and comes off the back of the banking royal commission
- We think the FAR needs to have a basic fairness obligation added to protect the interests of bank customers
In a survey of 7400 CHOICE supporters in May last year, more than nine in 10 (93%) said they'd like to see tougher laws in place that would make senior banking executives accountable for the conduct of the institutions they run.
We ran the survey in the wake of the banking royal commission, whose revelations of banking malfeasance and shoddy treatment of customers, it's fair to say, shocked the nation.
The royal commission recommended (among other things) that the current Business Executive Accountability Regime (BEAR), which only applies to large banks, be extended to capture a much wider range of financial firms.
We'd like to see the FAR extended to include the specific interests of bank customers – which have long been trampled under the banks' boots in the scramble for bigger profits
These include super funds, insurance companies and private health insurers. The government has named this new, beefed-up regime the Financial Accountability Regime (FAR).
CHOICE backs the FAR regime as a measure that's long overdue. But we'd like to see it extended to include the specific interests of bank customers – which, as the royal commission revealed, have long been trampled under the banks' boots in the scramble for bigger profits.
Not nearly FAR enough?
The way the proposed FAR legislation is drafted now, a bank executive's first responsibility is to make sure the bank stays solvent and performs profitably – an imperative that seems to put shareholders first.
But we think treating customers fairly is more important, especially given the litany of customer abuses the royal commission brought to light.
"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," says CHOICE CEO Alan Kirkland.
"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."
Team effort: joint submission to the Treasury
In an effort to make the FAR more customer-focused, CHOICE teamed up with Financial Counselling Australia, Financial Rights Legal Centre, Super Consumers Australia and Consumer Action Law Centre in a submission to the federal Treasury.
If designed correctly, the new Financial Accountability Regime could be a game changer for corporate culture in Australia's financial-services sectorCHOICE CEO Alan Kirkland
It calls on the Treasury to add a basic fairness accountability obligation to the document.
"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," says Kirkland.
"If designed correctly, the new Financial Accountability Regime could be a game changer for corporate culture in Australia's financial-services sector."
Along with our call for basic fairness, CHOICE and our allies are also calling for the deferred remuneration regime to be upgraded to global standards.
A well-designed FAR regime will be the defining legacy of the banking royal commissionCHOICE CEO Alan Kirkland
As it is, the deferred remuneration model in Australia falls short of the Banking Executive Accountability Regime that was set up in the wake of the global financial crisis.
"A well-designed FAR regime will be the defining legacy of the banking royal commission," says Kirkland. "Failure to implement this effectively, due to industry lobbying and pressure, would be a clear violation of commissioner Hayne's vision."