The banks face a new tax, raising $6.2 billion over four years to help fill repair a hole in the federal government’s revenue.
And senior executives are being held to account at Australia’s major banks – Commonwealth, Westpac, ANZ, NAB and Macquarie — under a new scheme announced in the 2017 budget.
The new Banking Executive Accountability Regime is being created, essentially meaning the licensing of senior executives at the big banks.
If they misbehave, they lose their licence and, possibly, any bonuses due.
The banks have been hit by series of scandals including charging for financial planning advise not given. Plenty of planners have been deregistered but no senior executive has lost his job in the fall out.
All senior executives will now be registered with the financial regulator APRA. If in breach, they can be deregistered and disqualified from holding executive positions, and be stripped of their bonuses.
APRA will be given stronger powers to remove and to disqualify senior executives and directors.
The government will mandate that a minimum of 40% of an executive’s variable remuneration — and 60% for CEO’s — be deferred for a minimum period of four years.
This will increase the financial consequences, by preventing bonuses being paid, for decisions which may take a long time.
APRA will get $4.2 million over four years to implement these new measures.
“Banks will also be held to account if they try and hide misconduct by executives with new mandatory reporting requirements,” says treasurer Scott Morrison.
If banks breach misconduct rules, they will also face bigger fines starting at $50 million for small banks and $200 million for large banks.
The government is also establishing the Australian Financial Complaints Authority, a vehicle where people can resolve disputes and obtain binding outcomes from the banks and other financial institutions.
A major bank levy, a six-basis point charge on the big banks’ liabilities, starts on July 1.
“This represents an additional and fair contribution from our major banks, is similar to measures imposed in other advanced countries, and will even up the playing field for smaller banks,” says Morrison.
“The levy will only affect our five largest banks with assessed liabilities of $100 billion or more and does not apply to superannuation funds or insurance companies.
“Importantly, customer deposits of less than $250,000 and additional capital requirements imposed on the banks by regulatory authorities are excluded from their assessed liabilities.
“Unlike the previous bank deposit tax, this is specifically not a levy on pensioners’ and others’ ordinary deposit accounts, nor is it on home loans.
“This measure will secure $6.2 billion over the Budget and forward estimates to support budget repair, including the reversal of significant budget savings measures.”
At a media briefing, Morrison said people had the choice of moving their business to smaller banks if the big institutions started jacking up their prices because of the levy.
“Take your money somewhere else and perhaps put it into a regional or smaller bank,” he said.
“This does level the playing field for those smaller and regional banks.
“The ACCC (Australian Competition and Consumer Commission) will be watching this closely and if there is any misleading conduct or misrepresentation by the banks on this matter, they’ll be on it.”
More budget coverage:
- BUDGET 2017: WHAT YOU NEED TO KNOW
- NEW TAX, BONUSES HELD FOR YEARS: Australia’s top bankers are the budget’s biggest losers
- A new visa will let citizens bring their foreign-born parents to Australia for up to 5 years
- How the 2017 budget will affect millennials who like smashed avocado toast
- People who smoke ‘rollies’ because they think it’s cheaper are about to be taxed the same amount as packet cigarettes