Bank inquiry: Regulators want more money for bank crackdown

Australian Financial Review Nov 27 2016 11:00 PM

James Eyers, Joanna Mather

The chairmen of the competition and corporate regulators say fulfilling an expanded role over the banking sector as envisaged by last week's House of Representatives standing committee on economics report will require additional resources, while the credit ombudsman says the proposed banking tribunal will kill the benefits of having competing schemes working for smaller financial services players.

The report said the Australian Competition and Consumer Commission (or proposed Australian Council for Competition Policy) should "establish a small team to make recommendations to the Treasurer every six months to improve competition in the banking sector" because "no regulatory agency is regularly considering the level of competition in Australia's banking sector and whether change is required".

"Ongoing monitoring of the banking sector's competitiveness will fill an important gap in Australia's regulatory framework," it said.

ACCC chairman Rod Sims said that, if the regulator is required to provide two reports a year to the government, it will need additional funding. "It is very much a policy issue whether the government wants to give us resources to look at this. That is what it would need if you are reporting every six months," he told The Australian Financial Review.

The government provided the ACCC $11 million over four years to monitor competition in the agricultural sector and Mr Sims said the banking sector could require a similar amount. "If the government provides us with resources to look at other sectors, then that is what we will do. To do that sort of job every six months, there is no question that we need additional resources. That's an issue for government."

The report's recommendations also involve more oversight by the Australian Securities and Investments Commission, including the policy to give effect to an open API data-sharing scheme. Chairman Greg Medcraft said it is up to the government to adopt any recommendations. He singled out data access as a good thing for competition but said this would require additional financial support.

 "One thing they're focused on is APIs, and that's the right thing to focus on," he said on Friday.

"I was in Singapore last week and the constant feedback was you've got to have access to the APIs. Whether it's ASIC or some other party [monitoring use of the technology], clearly there will have to be resourcing."

The dissenting report by the Labor members of the parliamentary committee said funding and resourcing of regulators is insufficient to properly regulate and scrutinise the banking industry.

The committee's recommendations for the ACCC to do more to monitor banks' compliance with competition laws came just a day before the ACCC said that ANZ Banking Group and Macquarie Bank had agreed to settle an action they had acted as a cartelwhile setting benchmark interest rates for derivative instruments linked to Malaysia's currency in 2011.

Mr Sims said other cases involving banks also were being investigated and banks needed to be aware of compliance with competition laws. "We enforce the Competition and Consumer Act in relation to banks as we do the rest of the economy," he said. "The competition laws apply to every firm in the country. We are the ultimate cross-sector regulator – we investigate everybody for breaches of the Competition Act."

Credit ombudsman critical

After the committee report last week also recommended the government establish a 'Banking and Financial Sector Tribunal' by July 1 next year, the Credit and Investments Ombudsman (CIO), Raj Venga, has warned that innocent, small players in the financial services sector – now utilising the CIO – will "pay the price" because any single tribunal will be designed around the needs of the big banks.

"The tribunal solution, or indeed any solution which involves a single ombudsman scheme, will force small financial services providers to join a scheme which is set up to deal with the problems of the big four banks," he said on Friday.

Having the Financial Ombudsman Service and the Credit and Investments Ombudsman had created competition between the schemes, keeping costs down and maintaining accountability, resulting in 97 per cent of the industry outside the major banks, including leading fintechs, favouring the existing two-ombudsmen scheme model, he said.

Any tribunal should be limited in scope to areas the existing ombudsman schemes do not cover, Mr Venga said.

A panel chaired by Melbourne University law professor Ian Ramsay reviewing the external dispute resolution schemes is expected to provide its interim report to the government this week. The Small Business and Family Enterprise Ombudsman, Kate Carnell, also will quiz business banking executives in Melbourne this week.