Australia grants invasive new power to financial regulator

Sydney

AUSTRALIA on Tuesday granted the corporate watchdog invasive new powers to position supervisors inside financial firms after a public inquiry exposed systemic wrongdoing at some of the country's top institutions.

The new powers for the Australian Securities and Investments Commission (ASIC) add to the regulatory pressure that has already driven banks to tighten lending standards in the wake of the Royal Commission inquiry into financial-sector misconduct.

"We will be going on-site," ASIC chairman James Shipton told reporters in Melbourne. "We will have supervisory officers embedded for significant periods of time inside these large financial institutions because I know it makes a difference to the way that they behave (and) to the way decisions are made."

An extra A$70 million (A$71 million) in federal government funding over two years will help build a team of about 20 staff based in bank offices, as well as into scandal-ridden wealth manager AMP Ltd.

"That may be days, may be weeks, may be months. Depending on the project at hand, depending on the task at hand and depending on the harm that we're trying to solve for," Mr Shipton said.

The move is an about-face for a business-friendly, centre-right government that initially opposed the establishment of the quasi-judicial commission of inquiry despite mounting evidence of wrongdoing in the financial sector.

The ongoing inquiry has exposed misconduct including deception of the regulator and the routine charging of fees for financial advice that was not provided.

The revelations have rattled the banking, funds-management and pension fund sectors, raising their compliance costs and triggering stricter regulation.

Investors have wiped more than A$26 billion off the combined values of the Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group, National Australia Bank (NAB) and AMP since hearings began in February.

The move to allow regulators inside banks would bring the watchdog's powers in line with its peers in Britain, Hong Kong and the United States, Treasurer Scott Morrison said.

"Having ASIC embedded in these financial institutions ... brings us into line with regulators overseas," he told reporters.

It follows proposals to double maximum prison terms for corporate crimes to 10 years and dramatically increase potential financial penalties from A$10 million to up to A$210 million or 10 per cent of revenue.

ASIC also would increase its scrutiny of the A$2.6 trillion retirement funds sector, called superannuation in Australia, Mr Morrison said.

The inquiry started hearings on the pension sector on Monday, and heard NAB had misappropriated millions of dollars from customers of its retirement products. REUTERS