Proposed Banking Tribunal Should Be Small "t" According to Government

In the wake of the Standing Committee on Economics (the Committee's) Review of the Four Major Banks (First Report) [released on 24 November 2016] raising expectations of a new Banking Tribunal, it has now been made clear, as the ABC News reports, that while most envisaged a more powerful wide ranging Tribunal to follow from the Committee's Review, the Government actually had another approach in mind, with the Financial Services Minister Kelly O'Dwyer telling the ABC's The World Today program that: 

A position somewhat at odds with that believed to have been indicated by the Prime Minister when he was previously reported in October 2016, as having ". . . flagged the creation of a banking tribunal following calls from Coalition backbenchers", namely, a body that would replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

In the light of this, it is interesting to take a closer look at the Committee's report and what it actually said, in general and with respect to a proposed Tribunal.

The Committees's Terms of Reference

The reference to the Committee was for ". . . an at at least annual public inquiry" into:

• the performance and strength of Australia’s banking and financial system;
• how broader economic, financial, and regulatory developments are affecting that system; and
• how the major banks balance the needs of borrowers, savers, shareholders, and the wider community.

with a particular focus on the banks’ perspectives on:

• domestic and international financial market developments as they relate to the Australian banking sector and how these are affecting Australia;
• developments in prudential regulation, including capital requirements, and how these are affecting the policies of Australian banks;
• the costs of funds, impacts on margins and the basis for bank pricing decisions; and
• how individual banks and the banking industry as a whole are responding to issues previously raised in Parliamentary and other inquiries, including through the Australian Bankers’ Association’s April 2016 six point plan to enhance consumer protections and in response to Government reforms and actions by regulators.

The Committee's First Report - Some of its Findings

In its First Report, the Committee indicated that it recognised that: 

Because of this there was a need to be able to trust that banks would act in the best interests of their customers when they turned to them for help and it was ". . . clear that in some cases this has not happened".

The Committee also indicated that it recognised the that the banking industry was taking steps to reform the banking sector, but that even so, in the view of the Committee, ". . . it is clear that gaps remain".

The Key Problem Areas Cited by the Committee

The first problem identified by the Committee was in the nature of the market power possessed by the major players in the banking industry. As the Committees report states:

The Committees report goes on to say that despite this market concentration, under Australia's current regulatory structure no entity is tasked with regularly making recommendations to improve competition, a position the Committee states ". . . must change". A change which will no doubt flow from the Committee now being tasked to report "at least annually" on the Big Four Banks.

The other problem is related to the culture of the Australian Financial Sector with the Committee saying in its report that ". . . not enough has been done to force banks’ senior leaders to change their behaviour" and that where this is shown to be the case consequences should follow:

The issue of a Tribunal is the addressed by the Committee as part of this "change of culture" problem with Committee saying:

The Committee's Key Recommendations

The Committee made 10 recommendations key among them being:

• the launch of a ‘one stop’ Banking and Financial Services Tribunal to replace the existing external dispute resolution schemes by 1 July 2017;
• public reporting of significant regulatory breaches, including the names of relevant senior executives and the consequences that they faced, as well as enforcement action in the wealth management industry;
• continual monitoring of competition in Australia’s banking sector;
• the creation of a data sharing framework for consumers’ and small businesses’ data by July 2018; and
• a review of the regulatory barriers to starting a bank.

The New Spin - Explaining the Difference Between "big T" and "little t" Tribunals

In further discussing the move to what is now reported as a small "t" tribunal the Finance Minister is  reported as saying that the emphasis is to be on a tribunal which focus on speed and cost effective resolution of disputes, in other words, a form of ombudsman rather than a more typical judicial Tribunal - the difference explained as:

The Finance Minister is reported as denying that establishing an ombudsman was inconsistent with what the PM had previously announced in October. Yet it is clear the Committee's report was of the view that the proposed Tribunal should replace the current ombudsmen (of which there are a few for the financial industry) and further, the report recommended the Tribunal be paid for by the banks.

The Opposition and the Greens remain critical of the Committee's report and even more critical of the apparent retreat on the size and scope of the Tribunal with the opposition still calling for a Royal Commission into the Banking Industry and the Greens appearing to favour an at least bigger "T"  Tribunal than that proposed by the Government.

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Review of the Four Major Banks (First Report) (Standing Committee on Economics)

Bank inquiry: Parliamentary committee calls for tribunal to be established (ABC News)

Government backs away from banking tribunal, implements another ombudsman instead (ABC News)