Australians have to place enormous faith in their banks.
From the purchase of their first home, the scribble of a signature to start their business, or the building of their retirement nest egg; banks remain at the centre of some of our biggest decisions in life.
It’s important for our economy and jobs that our banking system is strong, but it is also important that our Banks are held to account and are fair.
Banks are not perfect. They make mistakes. And they don’t always meet the fair expectations of their customers and the wider community.
There have been recurring scandals, and Australians remain puzzled by the big salaries, the rate rises and the fees for everything.
Too often, through their own actions, banks confirm some of the worst views Australians have of them.
Through our 2017-18 Budget, the Turnbull Government is bringing greater accountability to the banks, introducing tough new rules for banks and their executives that will keep their behaviour and decision making in check.
Banks and their executives must be held to account for any dishonest or scandalous actions that hurt customers and staff, or damage their company’s brand.
Under our new Banking Executive Accountability Regime, the financial regulator APRA will have the power to put banking executives under greater scrutiny, making them accountable for the decisions they make and fail to make.
Importantly, our banking regulator, APRA, will also have the power to act more swiftly against executives who are found guilty of crimes or who are caught in illicit activities where it affects their ability to do their job with competence, honesty or integrity.
And there will be strict consequences for those who fail to meet community standards, with APRA empowered to more easily remove or disqualify executives, and dish out substantial fines to banks when they fail to crack down on bad practices.
Central to the measures, bank executives and senior managers will be required to register with APRA, with banks forced to notify the regulator before they make senior appointments. This means that Bank executives can be de-registered when they do the wrong thing, just like losing your license.
This will stop banks being able to hire executives who have questionable histories, and protect customers from rogue operators who merely move from one bank to the next.
These are the standards the community expects from its banks and these are the standards I will be imposing on them.
A similar system of accountability is already in play in the UK, with some of the world’s biggest banks including Goldman Sachs, Citigroup and JPMorgan, putting forward the names of hundreds of their executives and managers to face scrutiny.
So how does the accountability regime work? Here are two simple examples.
If one bank deliberately and continually lends to customers who are unlikely to be able to repay the loans, APRA will have powers to take court action to impose new civil penalties for breaching the expectations on how the bank conducts its business.
In the most serious examples of reckless behaviour, this penalty could be up to $200 million.
If a scandal is caused by bank executives, APRA will be able to step in and not only scrutinize the actions of those individuals, but hold the bank responsible for not supervising their managers properly.
These new measures are in addition to the powers we will gave the Australian Securities and Investment Commission to crack down on dodgy financial advice and lending to people who can’t really afford it.
And we will make it simpler and fairer for those feeling let down by their bank or financial institution, through the creation of the Australian Financial Complaints Authority - a one-stop shop for customers to access free, fast and binding dispute resolution services.
Our comprehensive measures will lead to greater protection for bank customers, and fairer behaviour from our banks.
We will continue to keep a vigilant watch over our financial system so Australians are assured they can sign on to mortgages, business loans and retirement products with greater confidence.
It is what the community expects and what the Turnbull Government is delivering.