Million-dollar fines dumped after bankers raised ‘legitimate concerns’

A surprise plan to threaten finance executives with $1.1 million fines has been pulled from parliament after a ferocious response from banks and super funds, who told the government they should have been consulted on the changes.

Assistant Treasurer Stephen Jones has taken all financial services bills off parliament’s agenda for Friday, after days of deal-making with the Greens to get the financial accountability legislation passed before the end of the year.

Assistant Treasurer Stephen Jones has shelved financial reform deals after a backlash from the banking sector. Credit:Alex Ellinghausen

The Greens were certain they had won government support for an amendment introducing fines of up to $1.1 million for banking, superannuation and insurance executives who failed to take reasonable steps to prevent systemic misconduct.

After that deal was revealed by this masthead on Thursday, several bank chief executives called Treasurer Jim Chalmers to express their surprise and disappointment at the changes, which they had been told would not be included.

The treasurer is due to meet more than a dozen banking and superannuation heads on Friday for a roundtable discussion on housing.

The Financial Accountability Regime Bill was a major recommendation from the banking royal commission and would have extended the banking executive accountability regime to include super funds and insurers.

The previous government first introduced the bill in 2020 and included the civil penalty, but that was removed after backlash from the banking sector.

Jones said there had been no final agreement on the Greens’ amendments, and there was clearly plenty of stakeholder concern about civil penalties.

“We’ve asked them what it would take to get their support for that and other bills,” he said. “There’d been no sign-off on anything.”

Greens economic justice spokesman Nick McKim said he was furious that Jones was denying a deal had been made.

“There was 100 per cent, categorically a deal. We looked each other in the eye and shook hands,” he said.

“If the minister is saying there was no agreement he is not fit to be a minister. This is a disgraceful move to renege on our agreement.”

Jones said the government wants to talk to the industry about their objections, particularly the smaller banks and super trustees.

“All the Customer Owned Bank Association [members], the small mutuals, these are not high-paid bank executives,” he said.

“There’s very legitimate concerns that are being raised by these guys, so we want to take some time to listen and look at all of those.”

Jones said it did not mean there would be no civil penalties in the future.

“We’ll have a look at [the Greens’] amendments, we’ll consult, get some technical advice on them,” he said. “It’s most unlikely that this matter will get resolved this year.”

Jones said the banks, insurers and super funds all had concerns about the planned amendments.

“Often things that sound good at first blush, when you start looking through the details of the consequences of this, the first blush stuff doesn’t stack up,” he said.

Customer Owned Bank Association chief executive Mike Lawrence said regulations need to be proportionate. The association does not support amendments to introduce civil penalties to the Financial Accountability Regime.

“Individual civil penalties would have a chilling impact on our ability to attract and retain talent. We would be competing with sectors not subject to the regime and larger institutions with deeper pockets better able to compensate leaders for the additional risk,” he said.

“If individual penalties are introduced, this would disproportionately impact smaller banks that have a strong proven track record of treating their customers well.”

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