Financial services competition role for ASIC as agenda expands

The Australian 12:00am March 19, 2018

Andrew White

Australia’s corporate regulator will have competition issues in financial services added to its mandate and an expanded board as part of an overhaul to coincide with the start of new chairman James Shipton.

Revenue and Financial Services Minister Kelly O’Dwyer will today announce the expansion of the Australian Securities & Investments Commission’s mandate in a move she says will help ensure consumers get value for money from the industry.

“It is my belief that ultimately it is competition — not regulation — that is the best means of ensuring consumers get value for money in financial services,” Ms O’Dwyer will say in a speech to the annual ASIC forum in Sydney today.

“I think that everyone agrees that both consumers and financial services providers — particularly new entrants — benefit from a more competitive financial system.”

This new mandate will require ASIC to consider the effect that its work and the exercise of its powers will have on competition in the financial system.

The latest demands on ASIC’s resources will be delivered as Mr Shipton, a Harvard academic and former Hong Kong regulator who replaced Mr Medcraft last year, prepares for his first appearance at the forum, where the regulator lays out its agenda to its regulated community.

It follows the recommendation of the 2014 financial system inquiry and is the latest in a series of moves by the government including a Productivity Commission review and funding for the Australian Competition & Consumer Commission for in-depth inquiries into financial system competition issues.

The PC report last month found that there appeared to be a lack of price competition in banking, highlighted by a doubling of the spread between official interest rates and those paid by borrowers in the 10 years since the global financial crisis. And an ACCC interim report on an inquiry ­commissioned in the wake of the government’s $6bn bank tax last week said banks were slugging loyal customers with higher ­borrowing rates than for new ­customers.

The new mandate will be part of a new statement of expectations from the government, updating a 2014 document delivered to then treasurer Joe Hockey.

Ms O’Dwyer said the new document, which will require a statement of intent from Mr Shipton, acknowledged that ASIC has the challenging task as conduct regulator of balancing the operation of efficient capital markets and promoting trust and confidence in the financial system.

“It reflects the notion that for ASIC to be a successful regulator, it will need to continue to have an open and sound working relationship with its regulated population and counterpart regulators,” Ms O’Dwyer will say. “It further recognises how critical it is for ASIC to communicate its key decisions and regulatory outcomes to the public and demonstrate clearly how those decisions and outcomes align with ASIC’s legislative and strategic objectives.

“This is particularly essential now that ASIC is being funded by industry.”

In 2017 the federal government adopted Mr Medcraft’s recommendation for industry funding of ASIC, with companies and professions billed according to their size and the demand they placed on ASIC’s resources.

ASIC in 2016 won a restoration of earlier cuts to its budgets and an extension of then chairman Greg Medcraft’s mandate as he pursued banks over rigging of Australia’s benchmark interest rate.

But the 2016 overhaul also included a recommendation for the appointment of a specialist enforcement commissioner at ASIC, which is yet to be filled.

Ms O’Dwyer’s new statement of expectations comes as the commission awaits a potential overhaul of its senior ranks, with two of the four commissioners — John Price and Peter Kell — slated to retire in March and May respectively.

ASIC is able to have up to six commissioners and Ms O’Dwyer will today announce plans to add a second deputy commissioner to the structure of ASIC, bringing it into line with other bodies such as the ACCC.

The appointment would strengthen ASIC’s leadership and help ASIC administer new powers and increased responsibilities resulting from recent law changes.

It is expected it will also help the regulator engage more closely with its stakeholders and better communicate its role, priorities and resource allocations. The new position would require the agreement of the states and amended legislation granting the Governor-General discretionary power to appoint two deputy chairs.

Mr Sims said last week while the behaviour of the major lenders did not breach the Competition Act, which penalises cartel activity and colluding behaviour, the ACCC was considering ways to increase competition.