Our latest Financial Services and Credit Quarterly Update for the second quarter of 2017 can be downloaded here.
In the last three months there have been a number of important announcements in the Federal Budget affecting the financial services sector. These include:
- the new big bank levy, which is also being copied in South Australia
- further reforms to regulation of credit cards
- a commitment to introduce an “open banking” regime in Australia
- a banking executive accountability regime (BEAR) modelled on the UK regulation
- a new Australian Financial Complaints Authority to replace the existing ombudsman schemes
- expanding crowdfunding to proprietary companies
- new managed investment trusts for affordable housing
Competition is a major focus at the moment. The Productivity Commission has launched a wide-ranging review of competition in the financial system, while the ACCC will be conducting a pricing inquiry into mortgages and has been granted funds to set up a special unit in the ACCC to undertake regular inquiries into financial system competition issues.
In the commercial lending area, the ABA has committed to reforming small business loan contracts to reduce the level of covenants required from borrowers.
Another area of regulatory focus is commissions and other incentives. Regulation of life insurance commissions will commence on 1 January 2018. ASIC is continuing its surveillance of the mortgage market to see if “inappropriate” recommendations for interest only loans are being made by lenders and brokers. The ABA’s own review of remuneration by Stephen Sedgwick has also recommended a number of reforms to how incentives are used in retail banking, and controls over executive compensation are an important part of the BEAR.
It looks like there is no slowing in the pace of inquiries, reviews and reforms of the financial sector. The costs of compliance can only be expected to increase.
Patrick Dwyer and Kathleen Harris
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