First Federal Budget in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
2019-20 Federal Budget
Last week saw the first Federal Budget in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Federal Government announced they will provide $606.7 million over five years in response to the Royal Commission:
Use of Funding Amount
$2.6 million - Designing and implementing an industry-funded compensation scheme of last resort (CSLR) for consumers and small businesses.
$2.8 million - Providing the Australian Financial Complaints Authority (AFCA) with additional funding to help establish a historical redress scheme to consider eligible financial complaints dating back to 1 January 2008.
$30.7 million - Paying compensation owed to consumers and small businesses from legacy unpaid external dispute resolution determinations.
$404.8 million - Resourcing the Australian Securities and Investments Commission (ASIC) to implement it new enforcement strategy and expand its capabilities and roles in accordance with the recommendations of the Royal Commission.
$145.0 million - Resourcing the Australian Prudential Regulation Authority (APRA) to strengthen its supervisory and enforcement activities which will support its response to key areas of concern raised by the Royal Commission, including with respect to governance, culture and remuneration.
$7.7 million - Establishing an independent financial regulator oversight authority, to assess and report on the effectiveness of ASIC and APRA in discharging their functions and meeting their statutory objectives.
$1.0 million - Undertaking a capability review of APRA, which will examine its effectiveness and efficiency in delivering its statutory mandate, as well as its capability to respond to the Royal Commission.
$11.2 million - Establishing a Financial Services Reform Implementation Taskforce within the Treasury to implement the government’s response to the Royal Commission, and co-ordinate reform efforts with APRA, ASIC and other agencies through an implementation steering committee.
$0.9 million - Providing the Office of Parliamentary Counsel with additional funding for the volume of the legislative drafting that will be required to implement the government’s response to the Royal Commission.
Total $606.7 million AFCA and the Compensation Scheme of Last Resort
We are continuing to work towards the implementation of a compensation scheme of last resort (CSLR) to be administered by the Australian Financial Complaints Authority. The government continues to show a desire to implement a CSLR promptly, however it is integral that the scheme is implemented in the proper way and with the appropriate eligibility criteria. To this effect, the SR Group prepared and made a comprehensive submission to AFCA. We will update you with developments as they become available on this front.
Financial Services Industry Reforms and Better Regulation
The latest Federal Budget includes $404.8 million of additional funding to the Australian Securities and Investments Commission (ASIC), representing an increase of 25% on 2018-19 and a record level of funding for the regulator. A stronger, more resourced regulator leads to a more efficient financial services landscape and will hopefully help prevent the horrors of the past occurring again. The Australian Prudential Regulation Authority also received a funding increase of 30% on 2018-19, showing that the Federal Government are tacitly aware of regulation shortcomings in recent years.
All Australian Financial Services Licence (AFSL) holders will now be required to co-operate with the Australian Financial Complaints Authority (AFCA) in the resolution of disputes. This includes making available to AFCA all relevant documents and records related to the dispute. This is a positive step towards reinforcing the safety of the financial services industry and gives consumers access to a free external dispute resolution mechanism for all AFSL holders.
Treasurer Josh Frydenberg announced last week that the Government will begin making payments to consumers and small businesses who had previously received unpaid determinations through the now-defunct Financial Ombudsman Service (FOS) and Credit and Investments Ombudsman (CIO).
Mr Frydenberg also announced that in 2019-20, the jurisdiction of the Federal Court of Australia will be expanded to include corporate crime, with the Government providing more than $35 million in funding to support this expansion. The expansion and funding is designed to ensure that those who engage in financial sector criminal misconduct are prosecuted and face the appropriate punishment within a timely manner.
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