Tag: Banking Royal Commission

More Royal Commission Walk Backs…

Those with long memories will recall the passage of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry which reported in 2019. The inquiry heard evidence from many individuals as well as from industry representatives, which highlighted egregious behaviour, misaligned incentives and outright deception. The final report made a number of recommendations, many of which have not been implemented, or have been severely diluted. The industry played the long game, and the Government has walked back and watered down most of the reforms. No wonder Justice Hayne refused to shake Treasurer Frydenberg’s hand in that infamous photo, even then the writing was on the wall.

One recommendation in the The final report for the Royal Commission was that “changes in brokers’ remuneration should be made over a period of two or three years, by first prohibiting lenders from paying trail commission to mortgage brokers in respect of new loans, then prohibiting lenders from paying other commissions to mortgage brokers”.

In its official response to the royal commission in 2019, the Labor Party had originally proposed banning trail commissions paid to mortgage brokers and capping upfront commissions at 1.1 per cent. However, both sides of the political spectrum have confirmed that they would not be looking to change broker remuneration, after Labor MP Stephen Jones told The Adviser last month that his party would not seek to change it.

Now, following a meeting with members of industry last week, assistant treasurer Michael Sukkar MP has revealed that the federal government will not proceed with the broker remuneration review this year, after acknowledging that the broker commission structure is not problematic.
While the Morrison government had initially said in its official response to the final report in 2019 that it would ban trail commission payments for new mortgages from 1 July 2020, the Treasurer Josh Frydenberg had suggested to Momentum Media that the role of upfront and trail commissions would instead be reviewed in the “back half” of the year. It is this review that has now been dropped.

Go to the Walk The World Universe at https://walktheworld.com.au/

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New Legislation For Brokers Released

The government has released the draft legislation implementing 22 recommendations and two additional commitments which arose from the Hayne Royal Commission, including recommendations 1.6 and 2.7 which  establish a compulsory scheme for checking references for prospective financial advisors and mortgage brokers. Via Australian Broker.

Before the royal commission began, under ASIC’s Regulatory Guide 104, both Australian financial services licensees and Australian credit licensees were meant to undertake appropriate background checks before appointing new representatives, through referee reports, searches of ASIC’s register of banned and disqualified persons or police checks.

However, despite this requirement’s existence, the royal commission found financial services licensees weren’t doing enough to communicate the backgrounds of prospective employees among themselves, highlighting that licensees “frequently fail to respond adequately to requests for references regarding their previous employees” and that they do not “always take the information they receive seriously enough”.

As such, financial advisers facing disciplinary action from an employer were able to simply leave and find another to employ them.

Recommendation 1.6 and 2.7 seek to address this systemic weakness. 

The latter looks to promote better information sharing about the performance history of financial advisers, focusing on compliance, risk management and advice quality, while the former made sure this change is extended to mortgage brokers as well.

According to the draft legislation, the reporting obligation “targets misconduct by and serious compliance concerns about individual mortgage brokers” and “recognises that in the industry, other parties such as lenders and aggregators are often well positioned to identify this misconduct”.

Obligation to undertake reference checking and information sharing

New law: Both Australian financial services licensees and Australian credit licensees are subject to a specific obligation to undertake reference checking and information sharing regarding a former, current or prospective employee.

Current law: Australian financial services licensees are subject to general obligations, including taking reasonable steps to ensure its representatives comply with the financial services laws and credit legislation.

Civil penalty for failure to undertake reference checking and information sharing

New law: Australian financial services licensees and credit licensees who fail to undertake reference checking and information sharing regarding a prospective employee are subject to a civil penalty.

Current law: No equivalent.

The proposed legislation will be in consultation until 28 February, with interested parties invited to make a submission before the deadline.  

Banking Royal Commission Implementation Plan Revealed

The Treasurer has now (finally) released the proposed timetable for implementation of the recommendations from the Royal Commission made back in February.

It is entitled “Restoring Trust In Australia’s Financial System”, but of course the big question is, will these measures once implemented really get to the heart of the issue – we doubt it.

This is because the final Commission report ducked the critical conflict of interest issue between selling financial services products and delivering them.

There is first the issue of unequal power between a consumer and a financial services organisation.

We know from the Commission that financial services players consistently sought to maximise their returns, even when the best interests of consumers are businesses are voided.

And we know that the general level of financial knowledge and expertise in the community is very low – indeed many do not understand, for example the concept of compound interest, the impact of fees on returns, and even what annual percentage benchmarks really mean.

So, my view is that the RC implementation will not be necessary and sufficient to restore trust in the financial system, even if the large players chose to address their cultural deficits in relation to doing right by their customers. And industry bodies are still fighting rear guard actions to avoid significant change.

Which then takes us back to the weak and compromised regulatory system we have, where APRA and ASIC appear to land more on the side the financial system rather than consumers. So, out of all this, who is minding the back of households and businesses?

In other words Frydenberg’s introduction to this small (14 page) document has a hollow ring to it – or as bankers use to write on bad cheques “words and figures differ!”:

On 4 February 2019, I released Restoring trust in Australia’s financial system, the Morrison Government’s comprehensive response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. In it, the Government committed to take action on all 76 of the Royal Commission’s recommendations and, in a number of important areas, go further. It represents the largest and most comprehensive corporate and financial services law reform package since the 1990s.
Of the Royal Commission’s 76 recommendations, 54 were directed to the Government, 12 to the regulators and 10 to the industry. Of the 54 recommendations directed to the Government, over 40 require legislation.

In addition to the Commission’s 76 recommendations, the Government in its response announced a further 18 commitments to address issues raised in the Final Report.

The Government has implemented 15 of the commitments it outlined in response to the Royal Commission’s Final Report. This comprises eight out of the 54 recommendations that were directed to the Government and seven of the 18 additional commitments the Government made as part of its response. Significant progress has also been made on a further five recommendations with draft legislation either introduced to the Parliament, released for comment or detailed consultation papers issued.

The Government’s implementation timetable is ambitious. Excluding the reviews that are to be conducted in 2022, under the Implementation Roadmap by mid-2020, close to 90 per cent of our commitments will have been implemented. By the end of 2020 remaining Royal Commission recommendations requiring legislation will have been introduced.

In this Implementation Roadmap, we set out how we will deliver on the remaining Royal Commission recommendations and additional actions committed to. This will provide clarity and certainty to consumers, industry and regulators on the roll out of the reforms.
Of course, the Government’s actions alone will not be sufficient to address the widespread misconduct identified by the Royal Commission. Individual firms must make the changes needed to their culture and remuneration practices to put consumers at the core of their business. I expect industry to also align with the urgency and priority the Government is giving to its implementation task.

The Government will ensure that key firms in the financial sector continue to address the issues identified by the Royal Commission.

At the request of Government, the House of Representatives Standing Committee on Economics will inquire into progress made by major financial institutions, including the four major banks, and leading financial services associations in implementing the recommendations of the Royal Commission. As previously announced, we will also establish an independent review in three years’ time to assess the extent to which changes in industry practices have led to improved consumer outcomes.

The Government is delivering lasting change in the financial sector to ensure public confidence is restored.

Finally, the Australian Banking Association came out with this:

Australia’s banks have welcomed the Government’s timetable for legislative change following the Hayne Royal Commission and will work with the Commonwealth to continue implementing the Commission’s recommendations.

While the forward agenda for the required legislative changes was announced this morning, banks are well down the track of implementing recommendations for which they are responsible to improve customer outcomes and earn back the trust of the Australian community.

Of the Commission’s 76 recommendations, 54 were directed to Government and more than 40 of those recommendations require legislative change. 12 are to be taken forward by the regulators, 10 are for industry to implement – eight of these are specific to the banking industry.

ABA CEO, Anna Bligh said: “Since the Final Report was handed down six months ago, banks have been working to make changes to ensure that the recommendations become part of their operating fabric.

“Make no mistake, banks understand what the community and Government expects of them and are raising their standards to rightly meet those expectations.

“The recommendations included six changes to the Banking Code. All six are underway.  The ABA has already drafted provisions implementing five of the changes, had them agreed to by banks and submitted them to the regulators for approval. These are now on track for full implementation by March 2020,” Ms Bligh said.

The sixth change relates to the definition of small business. Consistent with the Commission’s recommendation, the definition was recently changed in the new Banking Code to include businesses with fewer than 100 employees and this measure is now fully operational. The further recommendation to change the financial threshold from $3M to $5M will be subject to a review that will be overseen by ASIC who will examine the potential impacts on the provision of credit to small business. The review is underway and expected to be completed in early 2021.  

“In relation to culture within banks, many, including the major banks, have already completed reviews. These banks have also introduced mechanisms for the ongoing tracking of culture to determine whether actions are having the necessary impact. But banks understand that effective cultural change is not going to come about through implementing the Royal Commission recommendations alone. It will only be achieved by putting the customer at the heart of every decision our banks make.

“In addition, all banks continue to review how they remunerate staff, with a focus on good customer outcomes, not just meeting financial targets,” Ms Bligh said. 

Following the release of the Final Report, the ABA established a dedicated Royal Commission Taskforce to oversee the industry’s implementation of the recommendations. This Taskforce has met six times over the past six months and will continue to meet regularly to ensure the industry responds swiftly to the Government’s legislative processes and acts to fully implement the recommendations

Government expands financial services inquiry

The Coalition government has expanded the inquiry into the financial services sector and the Royal Commission implementation.  From InvestorDaily

Treasurer Josh Frydenberg has asked the House of Representatives Standing Committee on Economics to inquire into progress made by financial institutions in implementing the recommendations of the Hayne Royal Commission. 

Ten recommendations were made by Commissioner Hayne in his final report directed towards the industry with the inquiry expected to learn how that implementation is progressing. 

Commissioner Hayne made a total of 76 recommendations but made it clear that primary responsibility for misconduct in the financial sector lies with the institutions concerned and their boards and senior management.

The remit of the inquiry has also been expanded to include other major relevant financial institutions and leading financial services associations. 

The inquiry will complement the continuation of the broader inquiry into the four major banks which was announced in 2016. 

The inquiry will provide further transparency to the public on the work the institutions are doing in implementing the Royal Commission recommendations.

The government hopes that in doing so it will contribute to restoring community trust in the sector. 

Why the banking royal commission will ultimately achieve little

From The Conversation.

Will the banking services royal commission have a lasting effect of improving the banking and financial sector? The answer is “no”. A temporary change is apparent, but the problems lie deeper than those addressed by the royal commissioner.

The worldwide pervasiveness of financial sector misconduct is an indication.

This is not a criticism of the Royal Commission as such. It had a limited mandate and limited time, although its approach of focusing on Australian case studies further limited its scope. And a broader investigation of economic and social underpinnings of financial sector misconduct would have required a different sort of Inquiry.

It’ll be hard to act on the report we had

Even then, any recommendations for fundamental changes to financial sector structure and activities needed to inhibit misbehaviour would have to run the gauntlet of gaining political support in the face of vested interests.

The response to, and government capitulation on, the Hayne recommendation regarding mortgage broking fees starkly illustrates the point.

Why will the recommendations not be a lasting solution? An important reason is that the royal commission interpreted “behaviour consistent with community standards” in a limited way to refer to situations in which customers were actually harmed.

But much of community angst over financial sector conduct relates to the broader use of market power and superior knowledge to extract an “unfair” share of the benefits from transactions with customers.

And it missed the broader problem…

Customers don’t get a fair share of the benefits from transactions, competition doesn’t work to make sure they do, and customers are often unaware that they have been exploited.

Why is it happening? The answer lies partly in this comment of Royal Commissioner Kenneth Hayne on page 54 of his interim report:

Much if not all of the conduct identified in the first round of hearings can be traced to entities preferring pursuit of profit to pursuit of any other purpose

Economists will rightly argue that there is nothing inherently wrong with the pursuit of profit or self-interest. It facilitates the efficient allocation of resources.

But unless it is accompanied by a concern with fairness (“do unto others as you would have them do unto you”) in situations of market power and superior information, as typically occurs in financial markets, it will lead to vulnerable consumers being exploited.

…which is a grey zone of unfairness

There is a large and poorly defined grey area between self-interested but clearly fair behaviour and self-interested unfair behaviour, which, in turn, merges into misconduct and illegal activity.

It is difficult for (particularly large) institutions operating in that grey area, even if committed to “fairness”, to ensure their employees do not slide towards the boundary. Or over it.

Moreover, competition between financial institutions in search of profits can lead to a “race to the bottom” in terms of lower financial product quality. This is not always apparent to some (or many) consumers – at their expense.

The financial sector particularly vulnerable to this problem.

First, many financial products and services are “credence goods” where the consumer needs them but is unable to assess their real worth either before or after the purchase.

A perfect example is a visit to the doctor. Often the reason we are visiting the doctor is because we don’t know what’s wrong with us. It makes it necessarily difficult or impossible to tell whether the doctor is good at her job.

Bankers sharpen their claws on each other

Second, much of the activity in financial markets is about trading and making profits (supposedly using superior information and expertise) at the expense of the another party in those markets.

If it is “right” for that part of the entity that does that to make money at someone else’s expense, why is it wrong for the part of the entity that deals with consumers to do that?

Here’s how the Commission could have tackled these problems in order to achieve real, longer term benefits.

Yet we license them…

First, it could have considered whether giving financial institutions a valuable “social licence” to operate in important business areas under advantageous institutional structures should bring with it extra enforceable obligations.

It could have also considered whether, given the lack of misconduct found in the mutual and cooperative sector, banks and other financial institutions could be organised more like mutuals.

Second, it could have recommended changes that would have given stakeholders other than shareholders (such as depositors and employees) a greater say in running those organisations (perhaps at board level) and a say in shaping their culture.

…and we could change the way they’re run

Third, it could have recommended structural separation between the retail and wholesale arms of firms to reduce complexity and the risks of deficiencies in control systems.

Structural separation could have also reduced the risk that the culture of trading and position-taking, in which profits are made at the expense of another party, spilled over into other parts of the institution where it wasn’t wanted.

Finally, it could (and should) have concentrated more on consumer protection.

It is a much broader issue than deterring and penalising misconduct.

Until consumer financial literacy catches up with financial product innovation and complexity, there will continue to be a big “market for financial misconduct”.

Exhorting institutions to do no harm won’t take it away.

The arguments made in this paper are developed in more detail in “The Hayne Royal Commission and Financial Sector Misbehaviour: Lasting Change or Temporary Fix? Economics and Labour Relations Review, Vol 30 (2), June 2019.

RC issues ‘not unique to Australia’, says former Coutts boss

A Hong Kong-based banker has applauded Australia for shedding light on issues within its financial sector and warned that the issues revealed by the royal commission are widespread across the globe, via InvestorDaily.

CFA Institute managing director, Asia Pacific, Nick Pollard has held a number of senior banking roles, including the MD of exclusive British bank Coutts and CEO of Coutts Asia. 

Speaking to Investor Daily, Mr Pollard said that while the major banks in Australia have shown a clear interest to be rid of their troubled wealth businesses, the fact remains that people need wealth management and financial advice. 

“The challenge for Australia, which is the challenge the rest of the world has, is how do you ensure the demands of the customers are able to be met by organisations that can provide that advice in a fair and transparent way?

“The industry as a whole hasn’t been very good at that over the last few years. That’s why regulators have become involved and it has become tougher to operate in this climate.”

While the Hayne royal commission has cast a shadow over the Australian financial services sector over the past 12 months, Mr Pollard believes the conversations that are now being had off the back of the inquiry reflect a positive approach that other markets are yet to benefit from.

“What Australia is doing, which many countries aren’t, is bringing this out into the public domain and having those critical conversations and hopefully can look forward with some optimism that the industry is owning up to the fact that it need to improve and needs to do something about it,” he said. 

“In many ways, the issues that are coming out of the royal commission don’t just apply to Australia. Don’t think that the rest of the world has got these things right. If there is any kind of introspection by those in the financial services communities of Hong Kong and Singapore it is ‘Where do we stand on these issues?’

“At least Australia has been bold enough to being this out into the public domain.”

According to global research consultants Cerulli Associates, Australia remains an attractive market for investment managers and asset consultants, both local and global.

While the royal commission has caused significant reputational damage, Cerulli Associated managing director for Asia, Ken Yap, said super funds in particular will still need to make exactly the same decisions about asset allocation, currency hedging, and liquidity as they always did, and nothing in the royal commission is likely to make them choose any different underlying managers than they have done in the past.

Banking Code shakeup after Royal Commission Final Report – ABA

The Australian Banking Association (ABA), says farmers, small business owners, customers living in remote areas or with limited English and Australians with basic bank accounts will receive new protections under a revamped Banking Code of Practice in response to the Final Report of the Royal Commission.

The new Code, approved by ASIC last year, introduces a range of new measures to make banking products easier to understand and more customer focussed. The Code itself is currently enforceable through the courts and the Australian Financial Complaints Authority as it forms part of a customer’s contract with their bank. 

Of the 76 recommendations, 29 apply to banks, 7 to be taken forward by the Australian Banking Association with the remaining to be implemented by regulators and government. 

The Code represents a stronger commitment to ethical behaviour, responsible lending, greater financial protection and increased transparency. The new changes announced today further increase protections for Australian customers. 

The Code will be updated with key amendments in response to the recommendations of the Royal Commission Final Report, which outlined the need for changes in protection for small businesses and farmers and a greater focus on customers in remote areas and those with limited English. 
 

In addition to changes to the Code, banks also support the Final Report’s recommendation (1.14) for clearer and improved practices for banks assisting farmers in financial distress.

Regarding recommendation 1.10, the current Code definition of $3m total credit exposure was reached after considerable evidence-based consideration about the likely impact on availability of credit and competition in the market. ASIC approval of this clause of the Code is subject to an ASIC review of its operation 18 months after it commences. 

The Royal Commission recommendation to expand the definition from total borrowings of a business to an assessment on a per loan basis regardless of the existing borrowings is a very significant expansion on the current definition which the industry believes should be considered carefully before any change is made.

The industry has serious concerns that this recommendation may have a material impact on access to credit for small business borrowers. 

In finalising the industry position on this recommendation, ABA members will model the impact on their own customers and consult with Treasury, regulators and small business groups.  

Some of the changes outlined in the table will be subject to regulatory approval and banks will work with ASIC, the ACCC and Treasury to ensure these changes are made as soon as possible. 

CEO of the Australian Banking Association Anna Bligh said that the updated Code would create a stronger code for customers.  

“The Royal Commission Final Report is the industry’s roadmap for earning back the trust of the Australian people,” Ms Bligh said. 

“The industry has taken the report and is acting with urgency to ensure lasting reform occurs without delay. 

“The Royal Commission highlighted the need for the Banking Code of Practice to be strengthened to increase protections for small business and increase the accessibility of services for customers in remote areas or with limited English. 

“In addition to the changes to the Code, banks will also deliver greater assistance to farmers through clearer and improved practices when assisting farmers with distressed loans.

“The industry will be implementing these changes to our Code as soon as possible.

“This work will build upon the new Code, approved by ASIC in July last year, which delivers a better banking experience for Australian customers,” she said. 

ASIC Responds To RC

ASIC said the royal commission’s recommendations reinforce and will inform the implementation of steps ASIC has been taking as part of a strategic program of change that commenced in 2018 to strengthen its governance and culture and to realign its enforcement and regulatory priorities; via InvestorDaily. 

“There are 12 recommendations that are directed at ASIC, or where the Government’s response requires action now by ASIC, without the need for legislative change. ASIC is committed to fully implementing each of these,” ASIC said in a statement. 

“Many of the recommendations made by the Royal Commission involve reforms ASIC advocated for in its earlier submissions to the Royal Commission and, in some cases, in earlier reviews and inquiries.” 

These include: 

• an expanded role for ASIC to become the primary conduct regulator in superannuation; 

• the extension of Banking Executive Accountability Regime (BEAR)- like accountability obligations to firms regulated by ASIC, with their focus being on conduct; 

• the end of grandfathering of Future of Financial Advice (FOFA) commissions; 

• the extension of the proposed product intervention powers and design and distribution obligations to a broader range of financial products and services; 

• the extension of ASIC’s role to cover insurance claims handling and the application of unfair contract terms laws to insurance; 

• reforms to breach reporting; and 

• ASIC being provided with a directions power

Recommendation 1.8 – Amending the Banking Code

ASIC confirmed it will commence work immediately with the banking industry on appropriate amendments to the banking code in relation to each of these recommendations.

Recommendation 4.9 — Enforceable code provisions

ASIC will work with industry in anticipation of the parliament legislating reforms in relation to codes and ASIC’s powers to provide for ‘enforceable code provisions’. 

“This work will include a focus on which code provisions need to be made ‘enforceable code provisions’ on the basis they govern the terms of the contract made or to be made between the financial services provider and the consumer,” the regulator said. 

“ASIC will also continue to work within the existing law to improve the quality of codes and code compliance.”

Recommendation 2.4 — Grandfathered commissions

The royal commission recommended that grandfathering provisions for conflicted remuneration should be repealed as soon as is reasonably practicable.

The government has agreed to end grandfathering of conflicted remuneration effective from 1 January 2021.

Consistent with the government’s response to this recommendation, ASIC said it will monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration for the period 1 July 2019 to 1 January 2021. 

“This will include consideration of the passing through of benefits to clients, whether through direct rebates or otherwise,” ASIC said. 

Recommendation 2.5 — Life risk insurance commissions

The royal commission recommended that when ASIC conducts its review of conflicted remuneration relating to life risk insurance products and the operation of the ASIC Corporations (Life Insurance Commissions) Instrument 2017/510, it should consider further reducing the cap on commissions in respect of life risk insurance products. 

The final report recommended that unless there is a clear justification for retaining those commissions, the cap should ultimately be reduced to zero.

ASIC today confirmed it will implement this recommendation. 

“ASIC will consider this recommendation and factors identified by the Royal Commission in undertaking its post implementation review of the impact of the ASIC Corporations Life Insurance Commissions Instrument 2017/510, which set commission caps and clawback amounts, and which commenced on 1 January 2018,” the regulator said. 

As noted by the royal commission, and consistent with the government’s timetable, ASIC’s review will take place in 2021.

Recommendation 6.2 — ASIC’s approach to enforcement

The regulator said actions are already underway to adopt an approach of enforcement that considers whether a court should determine the consequences of a contravention. 

In particular, ASIC has adopted a ‘Why not litigate?’ enforcement stance and initiated an internal enforcement review (IER). 

“ASIC’s Commission has determined to create a separate Office of Enforcement within ASIC and this will be implemented in 2019,” the regulator said. 

“ASIC will take the IER report and the Royal Commission’s comments on it into account, as it makes its final changes to its enforcement policies, procedures and decision-making structures to deliver on its ‘Why not litigate? enforcement stance.”

Recommendation 6.10 — Co-operation memorandum

Together with APRA, ASIC has agreed to implement this recommendation, including in relation to any statutory obligation to cooperate, share information and notify APRA of breaches or suspected breaches, that the Government puts in place as part of its response to Recommendation 6.9.

Recommendation 6.12 — Application of the BEAR to regulators

The royal commission recommended that both APRA and ASIC internally formulate and apply a management accountability regime similar to those established by BEAR. 

ASIC agrees to implement this recommendation. In anticipation of the Government’s establishment of the external oversight body, ASIC will commence work on developing accountability maps consistent with the BEAR. 

ASIC will consider the approach of the Financial Conduct Authority in implementing this recommendation. ASIC will develop and publish accountability statements before the end of 2019.

Beyond The Royal Commission

I discuss the Royal Commission outcomes with businessman John Dahlsen, who was a director at ANZ for many years.

He brings his extensive experience to the issues facing the sector, and lays out an approach which would create more customer centric, efficient and lower risk banks.

We talk about mortgage brokers, bank boards, front line staff and transformation programmes, plus ASIC and APRA, as well as the effectiveness of the Royal Commission itself.

Just 3 Years To The Next Banking Inquiry

While the banks would hope the fall-out from the Royal Commission can now be contained, and business as usual can apply, it seems another Inquiry is on the cards down the track, further evidence of continued pressure on the sector.

Treasurer Josh Frydenberg has told the banks and regulators that they will face an inquiry down the track to ensure they have lifted their game post-royal commission; via InvestorDaily.

In a letter to the ABA, ASIC and APRA, Mr Frydenberg directed the organisations to implement Commissioner Kenneth Hayne’s recommendations from the final report directed at them.

The Treasurer sent out three letters to the heads of the organisations and made it clear that the government wanted to see lasting change within the sector.

“We will establish a follow-up independent inquiry, commencing in three years, to assess changes in industry practice and consumer outcomes since the royal commission,” said Mr Frydenberg.

Alongside implementing recommendations, Mr Frydenberg underlined the importance of ASIC changing its approach to enforcement, particularly shifting to a ‘why not litigate’ stance.

“I am aware that change is already underway, including through the establishment of the Office of Enforcement within ASIC, the move to a ‘why not litigate’ approach to enforcement and the introduction of initiatives such as close and continuous monitoring, to more intensively supervise the sector,” Mr Frydenberg wrote.

Mr Frydenberg committed to ASIC it’s continued support in providing new powers, expanding its role as a super regulator, removing barriers and strengthening penalty provisions.

“The government remains committed to ensuring that ASIC has the resources it needs, and will give further consideration to ASIC’s resourcing needs as part of the 2019–20 budget,” he said.

ASIC and ABA were also told by Mr Frydenberg to work together to create an enforceable banking code of conduct.

“I also expect the ABA to work co-operatively with ASIC to have the relevant provisions of the banking code approved as ‘enforceable code provisions’ as soon as practicable after legislation providing ASIC with these powers has been enacted,” he said.

In a letter to the ABA, the treasurer said he expected the banking code to be amended to support more inclusive practices, expand the definition of small business and eliminate default interest from being charged on loads declared to be impacted by natural disasters.

Mr Frydenberg told ABA chief executive Anna Blight that it was imperative that its members commit to putting customers at the heart of their business.

“I ask that you work with your members to take action and truly commit to restoring trust in the financial system. Only strong and decisive action of the kind that leads to lasting change, will ensure that the misconduct revealed by the royal commission is not repeated and that the public’s trust is regained,” he said.

Mr Frydenberg also called on APRA to strengthen its regulating and enforcement approach and prompted the authority to act on issues relating to the prudential standards, ADI responsibilities and supervision of regulated firms.

“It is my expectation that APRA will consider seriously the findings that the royal commission has made, echoed in the Productivity Commission’s superannuation inquiry, including whether its supervisory approach is appropriate for its mandate with regard to superannuation,” he said.

The Treasurer reiterated the governments support for the body and said it would give further powers and funding to the authority as needed.

The letters come as the opposition party has accused the government of not moving fast enough to implement Commissioner Hayne’s findings.

Labor had tried to force Parliament to hold extra sitting weeks to pass legislation the dealt with the royal commission recommendations but has been unable to get the support of the crossbench.