Speaking at the FSC Leaders Summit in Sydney yesterday, Mr Bowen said Labor’s proposed Royal Commission would be “a prudent and timely examination of our financial regulation architecture”.
“I want the Royal Commission to recommend what is necessary to stop banking scandals, but also given our changing circumstances in Australia in recent years, that roles and accountabilities of our regulatory authorities remain transparent and continue to be properly understood and scrutinised,” Mr Bowen said.
Mr Bowen said it had been more than 20 years since the Wallis Report made recommendations to APRA or ASIC.
Rising levels of household debt, the “ad hoc nature of the changes” in regulation, and the rise and implications of fintech were cited as reasons for reconsidering the regulation of financial systems.
APRA’s responsibilities lay with prudential regulation, not macroeconomic stability, which it has increasingly had a role in due to rising debt in the household sector, Mr Bowen said.
The shadow treasurer voiced his concerns about the blurring of accountability between ASIC and APRA following the new powers given to APRA by the Banking Executive Accountability Regime (BEAR) of the Turnbull government.
“ASIC has typically led on these conduct issues, but since the budget, APRA’s responsibilities will now include undertaking similar roles,” he said.
We don’t need a Royal Commission into the financial services industry – the problems are well understood and the laws that are currently in place are well suited to deal with them (including the fact that ASIC has very extensive investigatory powers). The problem is that compliance with the law is not enforced because ASIC is underfunded – what is the point of putting more laws in place when the current laws are routinely ignored without there being any adverse consequences for those who do do so – more generally what is the point of giving ASIC more investigatory powers when it doesn’t have the funds to properly use the powers it currently has.. A good example is PI insurance – the law is clear as to the characteristics of the insurance that has to be obtained – but in practice many financial planners operate with grossly inadequate (that is functionally useless) PI insurance and some even operate without having PI insurance at all – if ASIC has ever taken regulatory action about this issue (for example by banning someone) I’m not aware of it.