Abbott blames ASIC for Australian banking industry’s wrongdoing

The Australian 3:45pm April 23, 2018

Rachel Baxendale

Tony Abbott has blamed finance industry regulator ASIC for failing to prevent wrongdoing by the big banks, despite stripping the watchdog of $120 million in funding in his government’s 2014 budget.

Describing damning evidence which has emerged from the banking royal commission of customers being charged for services they never received as “absolutely appalling”, Mr Abbott asked, “what were the regulators doing?”. [“Regulators”, plural; he didn’t blame ASIC alone. More spin to protect APRA? –RJB]

His comments came after ACCC chairman Rod Sims said the key problem his organisation and ASIC had faced had been the inability to impose fines large enough to deter banking and financial services companies from acting inappropriately.

“We all know that there are greedy people everywhere, including in banks, and obviously greedy people have been having their head inside banks, but banking is probably the most regulated sector of our economy,” Mr Abbott told 2GB.

“What were the regulators doing to allow all this to be happening? That’s the thing that keeps occurring to me every time I read fresh revelations. What was the regulator doing?

“Now my fear is that at the end of this royal commission we will have yet another level of regulation imposed on the banks when frankly what should happen is I suspect all the existing regulators should be sacked, and people who are much more vigilant and much less complacent go in in their place.

“The analogy is yes, punish the criminals, but if the police are turning a blind eye to the criminals, well you’ve got to get rid of the police, and get decent people in there.”

In 2014, Mr Abbott’s treasurer Joe Hockey slashed ASIC’s budget by $120 million over four years, resulting in 200 staff members being made redundant.

Mr Sims called for regulators to be able to impose fines as high as ten per cent of a bank or financial institution’s turnover.

“That’s the change we’ve got to make in Australia in relation to not only competition but also consumer penalties so that company boards really sit up and take notice and really focus on their breaching the act, and don’t just treat it, as you said in your introduction, as a cost of doing business,” he told ABC radio.

“The penalties we’re getting these days on both competition and consumer matters are tens of millions. We need penalties in the hundreds of millions.

“Now if you took a very large company that had turnover of $10 billion, the penalty would be up to a maximum of $1 billion, and that’s where you start getting the hundreds of millions of dollars in penalties, and that’s exactly what’s needed here, and I think if I could say, what I found very sad about watching the royal commission is you’re getting bankers both past and present who say that, ‘look, we’d like to do the right thing but if we did that it would damage our profits and damage our share price’.

“Let’s change the equation. Let’s say that you actually have to factor in hundreds of millions of dollars of fines to what you’re doing every day so that it actually does matter to your bottom line if you’re caught breaching the act.”