SYDNEY (Reuters) - Australia plans cutting recurrent funding to its corporate regulator in coming years, even as a wide-ranging inquiry into the financial sector exposes corporate malfeasance and regulatory shortcomings.
That will likely further weaken a watchdog already under staffing pressure and facing criticism for taking a soft touch approach to the banks, right when investors and the public are expecting a more robust regulator, corporate governance experts said.
Government revenue payments to the Australian Securities and Investments Commission (ASIC), which is tasked with enforcing corporate law, are estimated to fall 8 percent to A$320 million over the next four years, budget documents show.
The funding cut comes at a time when the Royal Commission inquiry has uncovered years-long misconduct in the financial sector, with an ASIC executive citing “limited resources” as one reason the problems weren’t discovered sooner.
“These cuts are not large cuts but they’re significant in the public’s mind and they’re significant for the morale and strength of resolve of the regulators concerned,” Thomas Clarke, a business school professor at the University of Technology, Sydney.
“One of the principal lessons of the Royal Commission in recent weeks has been ASIC’s toothless handling of the banks over the last ten years...I think the public will interpret this budget cut as giving up on ASIC to some extent, which is exactly the wrong signal.”
Ian Ramsay, professor of corporate law at Melbourne University, said the cuts were “unfortunate” in the current climate. “If anything we would expect more work from ASIC in terms of investigations and possible prosecutions.”
ASIC referred Reuters to Australia’s government for comment.
A spokesman for Kelly O’Dwyer, Australia’s Minister for Revenue and Financial Services, said ASIC is “well funded and resourced to undertake its important regulatory work.”
“Approximately 20 per cent of ASIC funding is project driven, so funding and personnel fluctuates from time to time,” he said in an emailed statement.
The budget provides ASIC an extra A$10.6 million over two years to assist with its involvement in the Royal Commission, along with other short-term project payments.
Reporting by Tom Westbrook; Editing by Shri Navaratnam