Need to know
- 73% of Australians say we need a scheme to protect victims of financial crimes who’ve been awarded compensation but never received it
- A mere 15% of Australians say they trust Australian finance executives to treat their customers fairly
- Nine in 10 Australians agree finance executives should be subject to personal fines
The federal government has been delivered a strong message in recent weeks – many Australians think sweeping financial reforms are needed to restore trust in our financial system.
The banking royal commission underscored the need in no uncertain terms, and its 2019 report laid bare the many misdeeds of Australia's financial sector and made a number of critical recommendations.
Many Australians think sweeping financial reforms are needed to restore trust in our financial system
Foremost among them is a compensation scheme for victims of financial crimes that were awarded compensation but never received it because the investment scheme or other financial entity had gone bust.
The government's current draft bill for a compensation scheme of last resort falls woefully short. It excludes managed investment schemes, which would leave thousands of victims empty-handed, and it limits any compensation to $150,000 regardless of how much was lost. (We're calling for a compensation cap of $542,500 for individuals, in line with the Australian Financial Complaints Authority cap.)
In the government's proposed scheme, for instance, victims of the recent Sterling First collapse would end up with nothing.
Majority of people want compensation scheme
In mid-October, a diverse coalition of 15 organisations, including CHOICE, called on the government to honour the spirit of this key recommendation from the banking royal commission and expand its proposed compensation scheme. We delivered a petition signed by 21,707 concerned Australians.
Now Australians as a whole have spoken, and the message is once again clear: in a recent nationwide survey, 73% say we need a compensation scheme.
For many, compensation is the difference between living a secure retirement and facing a life on the aged pension in the insecure private rental market.CHOICE banking policy adviser Patrick Veyret
"Justice delayed is justice denied," says CHOICE banking policy adviser Patrick Veyret.
"Over 1300 people have had their complaints and compensation awarded paused until the government passes the scheme. People have lost their entire life savings and are stuck in limbo.
"For many, compensation is the difference between living a secure retirement and facing a life on the aged pension in the insecure private rental market."
The many misdeeds of Australia's banking sector came to light during the banking royal commission.
Verdict: Banking executives should be held accountable
But Australians also have a further message for the government: we think executives in the financial sector should be held accountable for the wrongdoing of the institutions they run.
In our recent national survey, only 15% of Australians say they trust Australian finance executives to treat their customers fairly, and 9 in 10 Australians (90%) agree finance executives should be subject to personal fines when they break the law.
As it stands, the people on top face no penalties at all when the widespread malfeasance occurs on their watch and with their knowledge.
Executives who appeared before the royal commission admitted to targeting vulnerable consumers with harmful products, yet not a single banking executive was prosecutedCHOICE banking policy adviser Patrick Veyret
The banking royal commissions recommended a Financial Accountability Regime (FAR) to address this longstanding impunity, but the government has yet to act on this recommendation.
"The Australian community expects that banking executives are held to account when misconduct occurs under their watch. Executives who appeared before the royal commission admitted to targeting vulnerable consumers with harmful products, yet not a single banking executive was prosecuted," says Veyret.
Legislation for both the compensation scheme and financial accountability regime is expected to be debated in the coming days. With the lessons learned at the banking royal commission as a guide, Australians are calling on government to put the interests of the people above those of the financial services sector.
Stock images: Getty, unless otherwise stated.