Key player criticises plan for super watchdog

The Australian 12:00am May 8, 2017

Richard Gluyas

A key player in the proposed super ombudsman to cover all disputes in the financial system has slammed the initiative, saying it will be completely unaccountable, “powerless” to prevent future big-bank scandals and make smaller players uncompetitive by burdening them with huge costs.

In a damning assessment of the so-called “Super FOS”, due to be announced in tomorrow’s budget, the head of one of the three schemes to be merged said the irony was that the major banks would emerge as big winners.

“(The major banks) know the review is a diversion to avoid a royal commission,” said Raj Venga, chief executive and ombudsman at the Credit and Investments Ombudsman.

“Yet everyone who competes against them is against it.”

The Australian at the weekend revealed plans for a three-way merger between the CIO, the Financial Ombudsman Service and Superannuation Complaints Tribunal, with the new scheme to be up and running sometime next year.

The proposal is broadly in line with the recommendations of the Ramsay review of external dispute resolution in the financial system.

However, Mr Venga flagged a strong campaign by CIO and like-minded industry bodies against the creation of a Super FOS.

Super FOS could proceed through a merger by scheme of arrangement between FOS and CIO, but Mr Venga said that “won’t happen”.

The alternative was legislative change, which opened the way for a strong “no” campaign.

The CIO chief said the Ramsay review “fundamentally lacked credibility” because it supported the government’s previously announced intention to create a small ‘t’ tribunal.

“It was hastily commissioned to fend off calls for a royal commission and placate the Coalition backbench who were calling for a wide-ranging financial services tribunal,” he said.

“The Ramsay review offers the worst compromise for stakeholders — not being able to investigate the root cause of financial scandals, the proposed single ombudsman will be powerless to prevent future big-bank scandals to the detriment of consumers.”

Super FOS, he said, would have no statutory powers and would be unable to address the power imbalance between big banks and small businesses, or deal effectively with small business claims against banks.

A non-statutory scheme was unable to subpoena a third party to attend as a witness or produce documents, and could not join third parties, bind them to its decisions, cross-examine witnesses, take evidence on oath, investigate criminal fraud or impose penalties. “A Super FOS will undermine competition in financial services and play into the hands of the major incumbents,” he said.