ASIC to get funding boost to enhance surveillance

Australia's banks are to contribute AUD 121m ($95m) to the Australian Securities and Investments Commission (ASIC), which will also be provided with an extra commissioner with experience in the prosecution of financial crimes. Over AUD 61m ($48m) will be used to bolster the regulator’s data analytics and surveillance abilities, and AUD 57m ($45m) will be put towards improving ongoing surveillance in the areas of the financial advice, responsible lending, life insurance and breach reporting. Treasurer Scott Morrison said the move was a response to the issues plaguing the financial services industry. Interestingly, he added that should the regulator need more money in the future, it could claim this from Australia's banks.

The government has promised to boost Australia’s financial regulator’s surveillance powers with a multimillion-dollar technological upgrade in a move that will restore some of the funding stripped in Tony Abbott-era cuts.

The government will also appoint an extra commissioner with experience in the prosecution of financial crimes.

It is promising to shift the regulator to a “user-pays” funding model – in which the institutions it regulates are forced to pay for the ongoing cost of their regulation – so taxpayers no longer have to fund its operations.

The treasurer, Scott Morrison, said the reform package was a considered response to the problems plaguing the financial services industry.

He said it was better than the proposal from the Labor leader, Bill Shorten, who has been calling for a royal commission following years of financial scandals inside Australia’s banks.

“The motive of Bill Shorten is clear here,” Morrison said on Wednesday.

“His focus is not about getting outcomes for people affected by what’s happening in the banking and financial industry, his motive is about getting a political outcome for one person – Bill Shorten.”

In all, the Turnbull government’s reform package will be worth $127.2m over four years, with $121m of that being funded by Australia’s banks, and the remaining $6m hitting the budget bottom line.

More than $61m will be used to boost the regulator’s data analytics and surveillance abilities, while $57m will enable better, ongoing surveillance in the areas of the financial advice, responsible lending, life insurance and breach reporting.

The user-pays model will begin operation at the start of the 2017-18 financial year, but little detail has been provided by the government to explain how it will work.

Morrison said if the regulator required any extra money in the future, it could claim more money from Australia’s banks.

“That’s the whole point of this transition,” he said. “This puts [the regulator] on a much more sustainable footing.”

He also said he would be “furious” if the banks passed the cost of any user-pays levy onto consumers, but he gave no guarantee that the banks would not do so.

The government’s reform package means the financial regulator – the Australian Securities and Investments Commission (Asic) – will receive a large boost in technological and financial firepower, going some way to redress the $120m funding it lost in the former Abbott government’s 2014 budget.

It means Asic will have greater ability to monitor and prosecute modern financial crimes, something for which it has been criticised for failing to do adequately in recent years.

The chairman of Asic, Greg Medcraft, has had his term extended by 18 months so he can oversee the reforms inside his institution.



In response to the changes, Medcraft – who has also been criticised heavily during his time as Asic chief – said they showed the government had confidence in him.

“We have a lot of important work to continue and I am keen to get on with the job,” he said.

The reforms are a response from the government to the capability review into Asic’s performance, which it commissioned in July last year.

That review has not been released publicly yet, but it is understood to contain heavy criticism of Asic’s performance in recent years.

As part of the regulator’s transformation, the government will remove Asic from the Public Service Act, taking it outside the public service.

Steven Munchenberg, the Australian Bankers’ Association chief executive, has been contacted for comment.