Australia has just granted its corporate watchdog invasive new power to place supervisors inside financial companies following a public investigation that revealed systemic wrongdoing at some of the country’s top institutions.
The Australian Securities and Investments Commission’s new powers are an addition to the regulatory pressure that has already compelled banks to tighten lending standards in the aftermath of the Royal Commission probe into financial-sector misconduct.
“We will be going on-site,” said ASIC Chairman James Shipton in an interview in Melbourne. “We will have supervisory officers embedded for significant periods of time inside these large financial institutions because I know it makes a difference to the way that they behave (and) to the way decisions are made.”
An extra 70 million Australian dollars in federal government funding over the period of two years will help build a team of around 20 staff based in bank offices and in the scandal-prone wealth Manager AMP Ltd.
“That may be days, may be weeks, may be months. Depending on the project at hand, depending on the task at hand and depending on the harm that we’re trying to solve for,” said Shipton.
The decision is considered a nod from a business-friendly, center-right government that at first frowned upon the idea of establishing a quasi-judicial commission of inquiry in spite of the string of evidences of misdeeds and wrongdoings in the financial sector.
The ongoing probe has revealed misconducts including the deceptive actions from the regulator and the routine charging of fees for financial advice that was not provided.
The discoveries have rattled the banking, fund-management and pension fund sectors. This raised their compliance costs and triggered tighter and stricter regulations.
Investors have erased more than 26 billion Australian dollars off of the consolidated values of the Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group, National Australia Bank, and AMP since the hearings started last February.
The move to enable regulators inside banks would place the watchdog’s capabilities on par with peers in Britain, Hong Kong, and the United States, according to Treasurer Scott Morrison.
“Having ASIC embedded in these financial institutions…brings us into line with regulators overseas,” Morrison said.
This comes after proposals of doubling maximum prison terms for corporate crimes up to 10 years as well as drastically increasing potential financial penalties from 10 million Australian dollars to as much as 210 million Australian dollars or 10 percent of revenue.
ASIC would also increase its scrutiny of the 2.6-trillion-Australian-dollar retirement funds sector, called superannuation in Australia, said Morrison.
The probe started hearings on the pension sector on Monday. The probe had discovered that NAB had misappropriated millions of dollars from customers of its retirement products.
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