Sydney (Reuters) - Australia’s prudential regulator should be given powers as soon as October to cap bank executives’ salaries, delay their bonuses and drive them out of the industry if they were guilty of wrongdoing, Treasurer Scott Morrison said on Monday.
The government is pushing ahead with tougher rules for banks after a series of scandals undermined public confidence in the sector, including alleged breaches of money-laundering laws by Commonwealth Bank of Australia (CBA.AX).
The proposals, first announced in May and set in motion on Friday, open another front in the government’s campaign to reign in the powerful banks, which are still reeling from a levy on deposits announced earlier this year and face mounting regulatory pressure to boost capital.
“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,” Morrison told the Australian Broadcasting Corporation (ABC).
“They are going in, I’m not mucking around.”
He was responding to the banking lobby’s complaints that the government had failed to properly consult about the new rules.
“This is not good public policy making,” Australian Bankers Association Chief Executive Anna Bligh told the ABC, saying banks should not be singled out.
Australia’s biggest banks - CBA, National Australia Bank Ltd (NAB.AX), Australia and New Zealand Banking Group (ANZ.AX) and Westpac Banking Corp (WBC.AX) - have gone through a tumultuous period peppered with allegations of misleading financial advice, insurance fraud and interest-rate rigging.
Policy-makers have sought to reassure the public they are holding the banks to account, and on Friday unveiled new powers over executive pay to be handed to the Australian Prudential Regulation Authority (APRA) in October.
Atlas Funds Management Chief Investment Officer Hugh Dive, who invests in bank shares, said investors were not deterred by the prospect of greater regulation.
“It’s a consequence of operating in Australia where you have a oligopoly of four banks, and they are all are getting very good profits,” he told Reuters.
The scandals have fuelled calls for a broad judicial inquiry into Australia’s banking system, which could recommend greater regulation or even criminal charges. While the proposal has the backing of the opposition Labor Party, the conservative Liberal-led government says a so-called Royal Commission is unnecessary.
The major banks on Sunday scrapped an unpopular fee for non-customers who withdraw cash from their ATMs, a move seen by analysts as an attempt to win favour 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 in a note, adding the cost to the banks would be negligible.
Reporting by Paulina Duran in SYDNEY. Additional reporting by Colin Packham.; Editing by Stephen Coates