ASIC accused of going missing in action against banks

The Australian regulator has come under fire as questions arise around whether it had reluctance to take on the major banks.

According to interim findings, of the 1,102 proceedings between 1 January 2008 and 30 May 2018, only 10 of those were against the major banks in that time.

Of those 10, three were to Storm Financial and four to the bank bill swap rate manipulation, leaving three other proceedings affecting the major banks.

Speaking at a parliamentary joint committee hearing on ASIC oversight, Labor senator Chris Ketter asked ASIC chair Chris Shipton if there had been a “reticence to take on the major banks?”

“The statistics are clearly there, and that is something that is, in part, triggering our enforcement review,” Shipton responded.

“That is an important question. You are right to ask it. The royal commission is right to ask it. We are working to make sure that we have a very credible, robust and responsive answer. We want, and we intend to have, real deterrents when it comes to the big financial institutions.

“You can be absolutely assured that those terms of reference have been informed, enhanced and improved by the important questions, recommendations and observations of the royal commission.”

In the past decade, australian banks have been responsible for multiple breaches of the Corporations Act.

Since the financial crisis, they have paid more than A$1 billion in fines and compensation for their misdeeds. However, no senior banking executive has faced a court room.

Ketter asked ASIC deputy chair Peter Kell the same question.

“Sure. I would say upfront that we accept that we need to have a greater focus in our litigation against the major institutions,” Kell said.

“We have had a focus on seeking to change the way those businesses operate, get them to remove poor financial advisers and remediate their consumers where problems have emerged and so on.

“But I accept that that hasn’t always been accompanied by court-based litigation. As you have heard, that is an area where we need to increase our focus.”

In the report, Commissioner Hayne acknowledged ASIC’s use of its banning powers, but he criticised the regulator’s limited use of court action against embroiled entities.

“Rarely has ASIC gone to court to have the defaulting party penalised. The criminal prosecutions that have been brought have all been directed at individuals. Civil penalty proceedings have seldom been brought,” Commissioner Hayne said.

He also accused ASIC of too often entering into negotiations with accused parties, which go on to settle an issue through the payment of a financial penalty without having to make an admission of guilt.

ABOUT THE AUTHOR
Pedro Gonçalves
Pedro Gonçalves is Financial Correspondent at International Investment.

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