SYDNEY • Australia has given its financial regulator sweeping powers to cap the pay of bank bosses, delay their bonuses, and even ban them from the industry if they are found guilty of non-compliance, as it scrambles to restore trust in the scandal-hit sector.
The move underscores the immense pressure on the government to keep a tight grip on an industry that, in recent years, has faced accusations of withholding legitimate health insurance payouts, giving misleading financial advice and rigging interest rates.
The scandals have cost Australian banks hundreds of millions of dollars in fines and moved the government to launch a far-reaching inquiry, or a royal commission, which begins next week and has the power to recommend criminal charges.
Under the new law passed by the Senate yesterday, banks must do business with "honesty and integrity" and their senior executives will be held directly accountable for non-compliance.
"This legislation is part of a broader suite of financial services reforms... to put consumers first, ensuring Australians can have trust and confidence in the banking system," Treasurer Scott Morrison said in an e-mailed statement.
The Australian Prudential Regulatory Authority (Apra) can cap and delay executive bonuses, disqualify executives from the industry and levy fines of up to A$210 million (S$218 million).
Under the new law passed by the Senate yesterday, banks must do business with "honesty and integrity" and their senior executives will be held directly accountable for non-compliance.
Shareholders and investors have been disappointed with the high salaries banks' top brass have been drawing even as worries about the integrity of the sector mount.
Last year, the outgoing chief of Commonwealth Bank (CBA), which is embroiled in a money-laundering scandal, saw his total pay slashed by more than half to A$5.5 million, a reduction many thought did not go far enough.
The chief executive of top investment bank Macquarie Group took home A$18.7 million the same year.
The Senate's measure comes after a report from the country's chief economic advisory body accused Apra of creating an environment that promoted record profits over the interests of customers and failing to stimulate competition.
The Productivity Commission also said a three-decade-old law stopping takeovers between the so-called "Big Four" banks was outdated and should be removed. It will hand in its final report by July 1.
A spokesman for Mr Morrison said the government would then consider its response.
Australia's big banks - CBA, National Australia Bank, Australia and New Zealand Banking Group and Westpac Banking Corp - reported a combined net profit of about US$25 billion (S$33 billion) in the 2017 fiscal year, up 6.4 per cent from a year ago, according to KPMG.
CBA, the biggest of the "Big Four", is defending allegations by Australia's anti-money-laundering agency that it allowed thousands of suspicious transactions to pass through its systems.
Apra said it welcomed the commission's draft report. "We have actively engaged with the commission in the preparation of the draft report and we will continue to do so as it prepares its final report," an Apra spokesman said.
REUTERS