Australia has introduced tougher rules on banks that will go into effect as early as next month, including capping executives’ salaries, delaying their bonuses and driving them out of the industry if they are guilty of wrongdoing.
According to news from Reuters, the changes follow a series of scandals that undermined public confidence in the banking sector, including alleged breaches of money laundering laws by The Commonwealth Bank of Australia. There were also allegations of misleading financial advice, insurance fraud and interest-rate rigging by Australia’s biggest banks, including CBA, National Australia Bank Ltd, Australia and New Zealand Banking Group and Westpac Banking Corp.
In an attempt to reassure the public, policymakers unveiled new powers over executive pay to be handed to the Australian Prudential Regulation Authority (APRA) in October.
“I know the banks don’t want many of the elements of this legislation, but I’m not about to give them three months to make the case as to why they shouldn’t be in there,” said Treasurer Scott Morrison.
While many bank lobbyists deemed the new laws unfair, Atlas Funds Management CIO Hugh Dive said investors were not deterred by the prospect of greater regulation. “It’s a consequence of operating in Australia, where you have an oligopoly of four banks, and they are all are getting very good profits,” he told Reuters.
While the proposal has the backing of the opposition Labor Party, the conservative liberal-led government says a so-called Royal Commission is unnecessary.
In the meantime, the major Australia banks have already scrapped an unpopular fee for non-customers who withdraw cash from their ATMs, a move seen by analysts as an attempt to win favor with the public after months of negative headlines.
“This move appears to be driven by a desire to improve public opinion of the bank sector,” Deutsche Bank analyst Anthony Hoo said, adding that the cost to the banks would be negligible.