Prepared by Julia Winzar
As expected, one of the key focuses of the 2017 Federal Budget is on the banking industry. The key outcomes sought by the Budget announcements are to increase competition, accountability and fairness within the industry. These outcomes are supported by the following key announcements relevant to this sector:
Open banking regime
The Government proposes to introduce an open banking regime. Under this regime, customers will be given greater access to and control over their banking data in an effort to encourage better services, lower prices and more choice of providers. An independent review will be commissioned to determine the form of this regime.
Encouraging new banking entrants
The Government and APRA aim to encourage new entrants in the banking sector by:
- Removing the prohibition on certain ADIs from using the term “bank”.
- Reviewing and amending existing processes for obtaining a bank licence.
- Relaxing the 15% ownership cap.
These changes are likely to be introduced using a phased-approach.
Major bank levy
The Government proposes to introduce a levy on major ADIs from 1 July 2017. The levy will only apply to large ADIs with liabilities greater than $100 billion. The levy will be 0.015% of the ADI’s liabilities, excluding ordinary bank deposits and other deposits protected by the Financial Claims Scheme.
Banking executive accountability regime
The Government proposes to introduce a Banking Executive Accountability Regime. Under the regime, ADIs will be required to:
- Register all senior executives and directors with APRA prior to their appointment.
- Implement deferred remuneration structures for executives. The deferred structure will require a minimum of 40-60% (depending on the executive’s role) of the executive’s variable remuneration to be deferred for a minimum period of four years.
In addition, APRA’s powers will be expanded as follows:
- APRA will have increased powers to remove and disqualify senior executives and directors of APRA-regulated entities. In addition, APRA will be given the power to impose penalties on ADIs that fail to appropriately monitor the suitability of their executives to hold senior positions.
- Standards will be introduced in respect of the conduct of ADIs and their executives and directors to ensure good prudential outcomes. Penalties of between penalty of between $50 million and $200 million will be imposed for any breach of these standards.