FOFA may force bank restructures
Yet another key industry group has described the Government's Future of Financial Advice (FOFA) bills as failing to reflect the original findings of the Parliamentary Joint Committee which followed the collapse of Storm Financial.
This time, the Australian Bankers' Association has used its submission to the PJC reviewing the FOFA bills to say it does not believe that the FOFA legislative package is aligned with the stated policy intent.
In particular, the ABA said it considered that applying aspects of the best interests duty and conflicted remuneration provisions to basic banking products was inconsistent with the policy announcements which had been made by the Minister for Financial Services, Bill Shorten.
It said on this basis, it was essential legislation changes were put in place "to target areas of concern without imposing unnecessary regulatory requirements and compliance burdens across the banking and financial services industry".
"The ABA believes that the scope of the FOFA legislative package has extended significantly beyond the initial stated policy intent, and consequently will result in a number of adverse and unintended consequences for banks and banking groups and their customers.
"Regulation should target identified market failures," the ABA submission said. "However, we are not aware of any identified market failures, consumer detriment or systemic concerns regarding practices by banks in the offer of basic banking products or the provision of general advice by bank staff.
"We consider that the legal risks, regulatory burdens and compliance costs that will be imposed on banks as a result of the broad scope of the FOFA legislative package are unnecessary and inappropriate," it said.
The ABA submission said the organisation believed the FOFA legislative package could have extensive implications for banks and banking groups where financial advice services were delivered via diverse corporate structures, internal licensee arrangements and business models.
"In the absence of clarifying and tightening the application of the proposed provisions, we consider that there could be significant adverse and unintended consequences for banking competition domestically and the contestability of the banking and financial services industry internationally," it said.
"We are concerned that the FOFA reforms could result in banks having to substantially restructure their businesses in order to comply with the new law and/or significantly reduce choice for consumers and competition in the retail banking industry."
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