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Review of the Four Major Banks: First Report
Recommendations

Recommendation 1

2.1
The committee recommends that the Government amend or introduce legislation, if required, to establish a Banking and Financial Sector Tribunal by 1 July 2017. This Tribunal should replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
2.2
The Government should also, if necessary, amend relevant legislation and the planned industry funding model for the Australian Securities and Investments Commission, to ensure that the costs of operating the Tribunal are borne by the financial sector.

Recommendation 2

3.1
The committee recommends that, by 1 July 2017, the Australian Securities and Investments Commission (ASIC) require Australian Financial Services License holders to publicly report on any significant breaches of their licence obligations within five business days of reporting the incident to ASIC, or within five business days of ASIC or another regulatory body identifying the breach.
3.2
This report should include:
  • a description of the breach and how it occurred;
  • the steps that will be taken to ensure that it does not occur again;
  • the names of the senior executives responsible for the team/s where the breach occurred; and
  • the consequences for those senior executives and, if the relevant senior executives were not terminated, why termination was not pursued.

Recommendation 3

4.1
The committee recommends that the Australian Competition and Consumer Commission, or the proposed Australian Council for Competition Policy, establish a small team to make recommendations to the Treasurer every six months to improve competition in the banking sector.
4.2
If the relevant body does not have any recommendations in a given period, it should explain why it believes that no changes to current policy settings are required.

Recommendation 4

5.1
The committee recommends that Deposit Product Providers be forced to provide open access to customer and small business data by July 2018. ASIC should be required to develop a binding framework to facilitate this sharing of data, making use of Application Programming Interfaces (APIs) and ensuring that appropriate privacy safe guards are in place. Entities should also be required to publish the terms and conditions for each of their products in a standardised machine-readable format.
5.2
The Government should also amend the Corporations Act 2001 to introduce penalties for non-compliance.

Recommendation 5

5.38
The committee recommends that the Government, following the introduction of the New Payments Platform, consider whether additional account switching tools are required to improve competition in the banking sector.

Recommendation 6

6.1
The committee recommends that by the end of 2017:
  • the Government review the 15 per cent threshold for substantial shareholders in Authorised Deposit-taking Institutions (ADIs) imposed by the Financial Sector (Shareholdings) Act 1998 to determine if it poses an undue barrier to entry;
  • the Council of Financial Regulators review the licensing requirements for ADIs to determine whether they present an undue barrier to entry and whether the adoption of a formal ‘two-phase’ licensing process for prospective applicants would improve competition; and
  • APRA improve the transparency of its processes in assessing and granting a banking licence.

Recommendation 7

7.1
The committee recommends that the major banks be required to engage an independent third party to undertake a full review of their risk management frameworks and make recommendations aimed at improving how the banks identify and respond to misconduct. These reviews should be completed by July 2017 and reported to ASIC, with the major banks to have implemented their recommendations by 31 December 2017.

Recommendation 8

8.1
The committee recommends that the Government amend relevant legislation to give the Australian Securities and Investments Commission (ASIC) the power to collect recurring data about Australian Financial Services licensees’ Internal Dispute Resolution (IDR) schemes to:
  • enable ASIC to identify institutions that may not be complying with IDR scheme requirements and take action where appropriate; and
  • enable ASIC to determine whether changes are required to its existing IDR scheme requirements.
8.2
The committee further recommends that ASIC respond to all alleged breaches of IDR scheme requirements and notify complainants of any action taken, and if action was not taken, why that was appropriate.

Recommendation 9

9.1
The committee recommends that the Australian Securities and Investments Commission (ASIC) establish an annual public reporting regime for the wealth management industry, by end-2017, to provide detail on:
  • the overall quality of the financial advice industry;
  • misconduct in the provision of financial advice by Australian Financial Services Licence (AFSL) holders, their representatives, or employees (including their names and the names of their employer); and
  • consequences for AFSL holders’ representatives guilty of misconduct in the provision of financial advice and, where relevant, the consequences for the AFSL holder that they represent.
9.2
The committee further recommends that ASIC report this information on an industry and individual service provider basis.

Recommendation 10

9.21
The committee recommends that, whenever an Australian Financial Services Licence (AFSL) holder becomes aware that a financial advisor (either employed by, or acting as a representative for that licence holder) has breached their legal obligations, that AFSL holder be required to contact each of that financial advisor’s clients to advise them of the breach.