The Australian Financial Services Commission is recommending that a group of small banks be stripped of their regulatory powers by the Federal Government, warning that the regulatory regime is “unnecessarily complicated” and that the group will not be able to serve consumers adequately.
The advisory group is comprised of two banks, One Nation and Western Reserve, which are already the subject of regulatory investigations.
The advisory report recommends that the banks be removed from the Australian Capital Territory’s banking supervisory framework.
The banks were given regulatory powers in the banking superannuation fund in 2013 to help manage the risks that came with high net worth individuals investing in the Australian property and construction market.
The regulator has since been reviewing the rules to ensure they are fit for purpose and to ensure that the system remains sustainable.
In an advisory published on Thursday, the regulator’s acting chair, Professor John Hinchliffe, said the supervisory arrangements that had been in place for decades were “not sufficient for the task at hand”.
“The system has been in operation for decades, the regulators have been very clear about the need for more robust oversight, and the superannuations have been a huge source of financial stability for the Australian community,” Professor Hinchmiffe said.
“We need to do better.”
The regulator’s report comes as the Government is investigating how the bank superannuants are set to receive up to $2 billion in extra funding from the Reserve Bank.
In a statement on Thursday night, the Government said it was reviewing the superviser arrangements to ensure “they are fit and proper”.
“Under the Reserve Banks supervisers, the super funds of banks and superannuitants will provide superannuity for their superannutants and superusers and will not issue them with an obligation to maintain the super fund,” the statement said.
It is understood that the Government has indicated that the supervising banks are not required to maintain their super fund.
The Federal Government is due to meet with the bank Supervisors Association on Thursday afternoon.