Australia to Implement Stricter Rules for Business Executives

The Australian government is pushing through with stricter rules for banks after public confidence in the sector was undermined following a series of scandals.

In the attempt to reign in powerful banks, the proposal, which was set in motion on Friday, opened another front in the government’s campaign. The affected banks are still recovering from a levy on deposits announced earlier this year.

Scott Morrison, Treasure of the Turnbull Government, stated on Monday that Australia’s prudential regulator should be given powers as soon as October to delay their bonuses, cap bank executives’ salaries and drive them out of the industry if they were guilty of wrongdoing.  

"I know the banks don't want many of the elements of this legislation but I'm not about to give them three months to make the case as to why they shouldn't be in there," Morrison stated in an interview.

"They are going in, I'm not mucking around," he added, responding to the complaints of the banking lobby pointing out how the government had failed to properly consult about the new terms.

Australian Bankers Association Chief Executive Anna Bligh criticized their policy making, saying banks should not be singled out.

Some of Australia’s biggest banks including CBA, Australia and New Zealand Banking Group, Westpac Banking Corp, and National Australia Bank Ltd. have gone through a difficult period bombarded with allegations of misleading financial advice, insurance fraud and interest-rate rigging.

Policy-makers unveiled new powers on Friday for executive pay to be handed to the Australian Prudential Regulation Authority in October. They wanted to reassure the public that they are holding the banks to account.

Business Consequences

 Atlas Funds Management Chief Investment Officer Hugh Dive, who invests in bank shares, said investors were not deterred by the prospect of greater regulation.

"It's a consequence of operating in Australia where you have a oligopoly of four banks, and they are all are getting very good profits," he stated.

The previous scandals have provoked calls for a broad judicial inquiry into Australia’s banking system. Among the scandals was a finding of systematic misconduct in the Commonwealth Bank of Australia’s financial advice division and allegations that lenders including Australia’s biggest banks, tampered with the bank-bill swap rate, which the banks have denied.

The broad judicial inquiry might prove to be beneficial and could recommend greater regulation or even criminal charges yet a so-called Royal Commission is unnecessary.

On Sunday, major banks scrapped an unpopular fee for non-customers who withdraw cash from their ATMs; analysts’ sees this as an attempt to win over the public after months of negative headlines.