New laws holding bank executives to greater account for scandals and misconduct should be broadened to cover other financial services operators, as well as to conduct causing harm to consumers, a senate committee has urged.
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And the cross-party committee has called on the government to push back the rollout of the Banking Executive Accountability Regime (BEAR) laws by at least six months, after complaints by the banks and comments by the prudential regulator that the current July 1, 2018, launch date would be "challenging" to implement.
Labor and Greens senators also cautioned that, while their parties would not try to block the new laws in parliament, the BEAR bill did not reduce the need for a royal commission into the scandal-plagued banking sector.
"This inquiry, in fact, has received evidence that strengthens the case for a holistic and considered review of the sector rather than [ad-hoc] reforms," the Labor senators said.
The Senate's economics legislation committee report was handed down on Friday after a five-week inquiry, as the government continued its attempts to head off a push - including by some of its own backbenchers - for a banking royal commission.
Treasurer Scott Morrison has promised that the BEAR legislation, unveiled last month after being first announced in the May budget, will force banks and their leaders to "wear the consequences" of bad behaviour.
The government-chaired committee made just two formal recommendations: that the bill be passed, and that its introduction be pushed back from July 1 next year to 12 months after the laws clear parliament - potentially delaying them by more than six months if the bill is not passed by the end of the parliamentary year.
"The committee accepts the importance of introducing the BEAR regime as soon as possible ... [however] the committee shares the concerns of submitters, particularly those representing smaller ADIs, regarding the logistical difficulties of implementing the BEAR in a relatively short timeframe," it said.
While it did not make a formal recommendation on the issue, the committee also called for the measures to be eventually extended to beyond prudential issues, to non-bank financial institutions and to conduct directly impacting consumers, after hearing evidence from consumer groups and former Australian Securities and Investments Commission chairman Greg Medcraft.
"While the BEAR is a welcome and important start, the committee believes that, in time, heightened accountability obligations should be extended to non-ADI firms in the financial sector and also to matters that affect consumer outcomes," it said.
The proposed new laws will apply to all Authorised Deposit-taking Institutions (ADIs) supervised by the Australian Prudential Regulation Authority (APRA), which include big, second-tier and customer-owned banks.
The regime requires institutions to map out and disclose to APRA which executives are responsible for each part of their operations, with those executives required to act with "honesty and integrity" and have a portion of their bonuses set aside for up to four years. Executives face having their bonuses clawed back if they breach the laws, or being disqualified by APRA, and banks can be fined up to $210 million.
The BEAR laws are supported by Labor, the Greens, consumer groups and the banks themselves, but several submissions to the committee complained that the consultation was rushed and the introduction period was too short. Concerns were also raised about the phrasing of the legislation,
Smaller banks also flagged concerns that the new regime could prove more onerous for them compared to the bigger banks, and argued that the penalties were "disproportionate" and would have a much bigger impact on them.
In its report, the committee agreed that the proposed penalties did appear to be disproportionate in relation to smaller banks, and said the government may wish to consider reworking the penalty regime.
The Labor senators said they would not stand in the way of the legislation, but said they would seek amendments that would make it easier for small and medium-sized institutions to adjust to the new laws. They warned that the proposed laws were "unlikely to change the culture" of major financial institutions.
In a dissenting report, Senator David Leyonhjelm opposed the bill, saying the laws were not a "legitimate exercise of government authority" as it was up to the market to ensure particular businesses met community expectations.
A spokesman for Mr Morrison said: "The government notes the Senate committee report and will respond in due course."
