Restoring Confidence in Consumer Financial Protection Regulation in Australia: A Sisyphean Task?

On managing hypocrisy: The transparency of sustainability reports

“…Like many other firms, Australian financial services firms have come under intense scrutiny since the Global Financial Crisis of 2007-2009 (Glynos, Klimecki & Willmott, 2015;Herzig & Moon, 2013;Liu, 2015). Globally, concerns have arisen about the poor culture within the industry (Wishart & Wardrop, 2018), regulatory safeguards (Schmulow, Fairweather & Tarrant, 2019), oversights of banking products and services, risk-taking behaviours, and poor corporate governance (Adams, Borsellino, McCalman & Young, 2017). Calls for greater transparency have repeatedly been made in this sector (Compass, 2010).…”

“…Norms of short-termism, performance rewards and a focus on profit maximisation prevail (Catalyst, 2015). They are both firmly ingrained in the economy and loom large in the public domain (Schmulow et al, 2019). Commercial banks represent the third largest sector of the Australian economy, account for over 40% of the total market capitalisation of the Australian Stock Exchange (Liu, 2015) and represent $AUD 522 billion in Australian household deposits (or approximately one third of Australia's Gross Domestic Product [GDP]) (Catalyst, 2015).…”

“…Commercial banks represent the third largest sector of the Australian economy, account for over 40% of the total market capitalisation of the Australian Stock Exchange (Liu, 2015) and represent $AUD 522 billion in Australian household deposits (or approximately one third of Australia's Gross Domestic Product [GDP]) (Catalyst, 2015). Australian banks fund most of the assets in the economy and a significant proportion of Australian banking stock is owned by Australian superannuation funds (Schmulow et al, 2019). The spill-on effects for the economy as a whole mean that they are 'too big to fail' (Scholtens, 2009).…”

Has the Australian Prudential Regulation Authority Done Enough to Meet Its Legislated Objectives and Prepare Australia for the Next Financial Crisis?

“…217 As noted recently by Schmulow, Fairweather and Tarrant, such oversight can provide an important role not only in preventing mis-use of power but also 'under-use of power [as a result] … of regulatory capture'. 218 The largest banks in Australia and elsewhere operate as financial conglomerates, with vertically integrated structures that operate with deeply entrenched institutional and sectoral risks. Moreover, the world of finance is increasingly interconnected across the globe and the Bank for International Settlements has reportedly indicated that '[t]he global economy is caught in a permanent trap of boom-bust financial cycles, a deformed structure becoming ever more corrosive and dangerous as debt ratios rise to nosebleed levels'.…”

“…171 The fact that financial institutions are in many respects providing a quasi-public service has arguably enabled them to avoid regulatory consequences, on the basis of a perception that financial stability was best served by protecting those institutions. 172 At an operational level, bank supervisors and regulators are in close contact with the institutions they oversee and need their cooperation. 173 Regulators naturally want to identify and work smoothly with those they are working with and supervising on a daily basis.…”