The federal government has taken aim at Australia’s most powerful banks, using this year’s budget to attempt to instil more accountability and competition in the financial sector.
The government will seek to create a “one-stop shop” for all financial complaints, called the Australian Financial Complaints Authority (AFCA).
With a remit to “ensure consumers have access to free, fast and binding dispute resolution services”, Treasurer Scott Morrison said at a press conference on Tuesday evening that the new body shows the government is going to act now, and not “wait three years while lawyers trip around the country” to improve dispute resolution in the banking sector.
All financial companies that deal with consumers, including superannuation firms, will be required by law to be a member of the AFCA, which will be funded by $4.3 million in funding to the Australian Securities and Investments Commission.
The banks will also face the prospect of a beefed up Australian Prudential Regulation Authority (APRA), which will be tasked with overseeing a new Banking Executive Accountability Regime.
The government will seek to give APRA the ability to remove or disqualify banking executives, make changes to banks’ remuneration policies and impose new conditions for banking conduct. If the banks don’t comply, they could face penalties of up to $200 million, according to budget materials.
But the crown of the government’s banking reform is a “major” bank levy of 6 basis points on banks with liabilities that exceed $100 billion.
The levy is expected to raise approximately $6.2 billion over four years.
“This represents a fair contribution to the community from our major banks, is consistent with other advanced countries and helps foster competition from smaller banks,” the government said.
Morrison said the new system is modeled on a similar system in operation in the UK and will work in tandem with new measures to address competition in the banking sector for small businesses and individuals.
The government will seek to introduce an Open Banking regime to give bank customers better access to their own data, and committed to encourage new entrants into the banking industry.
It has also asked the Productivity Commission to conduct a review of competition in the financial sector, which will commence on July 1 this year, and will create a dedicated unit within the Australian Competition and Consumer Commission to address banking issues.
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Eloise is an experienced business journalist and editor, who has held senior editorial roles at SmartCompany since 2014. Prior to joining SmartCompany, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry. Eloise has degrees in media and communications, marketing and business management, and political science. You can follow her on LinkedIn, and Twitter at @ellykeating.
