Asic urges Coalition not to bow to ‘loud voice’ of banks and water down regulations

Australian Securities and Investments Commission deputy chair, Karen Chester, says banks have ‘empathy gap’ that needs closing

The corporate watchdog has called on the Morrison government not to bow to “the loud voice of exceptionalism” by yielding to pressure from the banks to water down stricter regulations of the financial services sector.

In a speech to company directors on Friday afternoon, Australian Securities and Investments Commission deputy chair, Karen Chester, said last year’s banking royal commission “identified the cumulative and damaging exceptionalism that took hold in the legislative norms of conduct for the financial system” and it was important the government’s program of legislation implementing the royal commission’s recommendations should press ahead.

She also accused banks of having an “empathy gap” with consumers and warned them they needed to be ready to meet new Asic powers to control the design and distribution of financial products.

The banks have been lobbying the treasurer, Josh Frydenberg, and key backbenchers to blunt Asic’s efforts to curb some of their excesses in a campaign that has focused on responsible lending rules.

But the campaign against regulation was derailed this week by the resignation of one of its main urgers, Westpac’s chief executive, Brian Hartzer, who was forced to quit after Australia’s financial intelligence agency launched blockbuster legal action against the bank – accusing it of failing to prevent 23m breaches of anti-money-laundering law, some of which involved payments consistent with child exploitation.

Chester said people should “recall how the loud voice of exceptionalism drowned out the consumer voice” as government moved to enshrine the royal commission’s recommendations into law in just 12 months.

“It’s an ambitious legislative reform program,” she told members of the Australian Institute of Company directors at a function in Brisbane.

“And one that should be spared a groundhog day of exceptionalism. For the voice of exceptionalism is anything but exceptional.”

Chester warned against banks blaming consumers. She said they needed to close the empathy gap by learning “the limits and vulnerabilities of their customers”.

“And in doing so, not exploit innate constraints in human cognitive capacity and exploitable behavioural biases,” she said. “In short, to close the empathy gap firms must care about consumer outcomes.”

The era of regulation based on disclosure was over because products were too complicated.

“Disclosure has proved no defence against the totality of sharp practice,” she said.

Banks needed to put the customer first if they wanted to avoid adding to a remediation bill that already topped $10bn, have their products banned by Asic or even see a repeat of the royal commission.

“Design and offer products that deliver value – not surprises – and are sold fairly,” she said.

“Design ‘choice architecture’ that it is fair for consumers. And tackle head on complexity in financial services and products that are unnecessary and harmful to consumers and ultimately a value loss for shareholders.”


Ben Butler

The GuardianTramp

Related Content

Article image
Westpac chief executive blames bank's 'culture' for ignoring Asic – as it happened
Brian Hartzer appears before banking royal commission following revelations former CBA chairman ‘did not agree to return any of his fees’

Michael McGowan

21, Nov, 2018 @6:08 AM

Article image
Asic snaps back at critics of responsible lending laws after Frydenberg comments
Corporate regulator says suggestions that rules curb flow of credit to small businesses is a ‘myth’

Ben Butler

14, Nov, 2019 @6:20 AM

Article image
Westpac knew anti-crime provisions were inadequate years ago, MPs told
Labor senator reads out secret report in parliamentary inquiry over objections from bank

Ben Butler

07, Feb, 2020 @7:27 AM

Article image
Why not a big stick for Westpac and the banks? They’re acting like Marvel villains | Richard Denniss
The scrutiny of the big four should not stop until their systemic breaches of the law do

Richard Denniss

21, Nov, 2019 @4:08 AM

Article image
Asic accuses Westpac of insider trading over $12bn Ausgrid privatisation deal
Corporate regulator alleges the big bank used inside information to execute the largest interest rate swap in Australian history

Ben Butler

05, May, 2021 @7:05 AM

Article image
Not happy Westpac: how customers can show their discontent over banking scandals
The first step is to lodge a complaint directly with the bank. The second is to switch to another bank

Josh Taylor

30, Nov, 2019 @7:00 PM

Article image
Australian banking ends a year from hell as 'the face of unconscionable greed'
Scandal after scandal tarnished the banks in 2019, which began with a royal commission and ended with allegations of enabling paedophilia

Ben Butler

27, Dec, 2019 @7:00 PM

Article image
Commonwealth Bank, ANZ, NAB and Westpac axe ATM fees for customers of rivals
Greg Hunt welcomes decision but Bill Shorten says royal commission into banks is still needed

Amy Remeikis and agencies

24, Sep, 2017 @5:19 AM

Article image
Banking royal commission hears broker viewed Westpac loans as 'easier' to get
Aussie Home Loans criticised for lax compliance around fraudulent behaviour of four of its mortgage brokers

Kelsey Munro

16, Mar, 2018 @5:01 AM

Article image
Asic to embed staff in big banks to enforce compliance
Supervisors from corporate watchdog will be stationed inside Australia’s biggest financial institutions as part of crackdown

Gareth Hutchens

06, Aug, 2018 @10:39 PM