Implementation Roadmap – Victorian Chamber of Commerce, Melbourne (19 August 2019)


Date : 19 August 2019

Author: The Hon Josh Frydenberg MP

The Hon Josh Frydenberg MP
Federal Member for Kooyong




19 August 2019


Thank you to the Victorian Chamber of Commerce and Industry for hosting me today.

On 4 February 2019, the Government released its response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, committing to take action on all 76 recommendations made by Commissioner Hayne and, in key areas, to go further. Today I am pleased to announce the Implementation Roadmap setting out how the Government will deliver on its comprehensive response to the Royal Commission.

It is a reform package that represents the largest and most comprehensive corporate and financial services law reform process since the 1990s when the Corporate Law Economic Reform Program began.

Australia’s financial services sector, in terms of share of GDP, is the single largest sector in the economy at around 10 per cent. The sector employs around 440,000 people and contributed $163 billion to the Australian economy in 2017/18. It is also a critical enabler of activity across the economy and is fundamental to the financial security and wellbeing of every Australian.


it is absolutely critical that the financial services sector works in the interests of consumers and small businesses.

History of reform 

The Coalition has a long and proud history of reforming the financial system.

We commissioned the Campbell Inquiry, which reported in 1981, and the Wallis Inquiry, which reported in 1997. Both of these inquiries spurred major financial and economic reforms, giving birth to much of the current financial system architecture.

Continuing this tradition, in 2013, we initiated the Financial System Inquiry (FSI) which involved a ‘root and branch’ review of the financial system.

While Australia’s financial system had withstood the enormous stresses of the global financial crisis and performed better than almost any comparable system in the world, it was clear on coming into office that not all the international lessons of the crisis had been learned in Australia.

The FSI found that while Australia’s financial system had performed well since the Wallis Inquiry, it also found the system had a number of weaknesses, including that it remained susceptible to financial shocks and that unfair consumer outcomes remained prevalent.

The FSI and the Government’s response have led to a modernisation and strengthening of our regulatory framework such that our financial system is undoubtedly more resilient today than before the last financial crisis. Our major financial institutions are now regulated even more intensely and are required to hold even more capital – at levels that ensure they are ‘unquestionably strong’.

The reforms from the FSI improved outcomes for consumers not just because we had a stronger and more robust system that was better placed to deal with future shocks but also because reforms made the system fairer. Reforms such as:

The Government didn’t stop at the FSI. Over subsequent years we introduced significant reforms to further improve accountability and consumer outcomes in the financial system. Among them:

The Royal Commission — highlighting the cost of misconduct

In December 2017, the Government established the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and appointed former High Court judge, Honourable Kenneth Hayne AC as its Commissioner.

Receiving over 10,000 public submissions, conducting 68 days of hearings and calling more than 130 witnesses, the Royal Commission shone a spotlight on the extent of misconduct and conduct falling below community standards and expectations across the financial system.

I want to again acknowledge the extraordinary work of Commissioner Hayne and all those involved.

Through the course of the Commission we heard about dead people being charged fees for no service, the pressure selling of worthless insurance policies to vulnerable individuals and some firms misleading our financial regulators and choosing not to cooperate with AFCA in the resolution of disputes with their customers.

Commissioner Hayne found that much of the conduct he identified could be traced to financial institutions and individuals preferring the pursuit of profit and personal gain over any other purpose.

Commissioner Hayne put it succinctly:

‘two themes recurred: dishonesty and greed’.

More importantly, the Commission highlighted the cost of this misconduct – of broken lives and families.

Let there be no doubt that the Morrison Government is committed to implementing our response to the Royal Commission and let there also be no doubt that we will make the necessary changes to restore Australians’ faith and trust in the system.

The Government’s Royal Commission response will drive lasting change in the sector.

In his Final Report, Commissioner Hayne made 76 recommendations for reform. Of these, 54 recommendations were directed to the Government, 12 to regulators and 10 to industry.

The Government responded to the Royal Commission’s Final Report within four days and agreed to act on all 76 recommendations.

In a number of important areas, the Government promised to go further, making an additional 18 commitments.

These additional commitments are important in fully addressing the issues identified by Commissioner Hayne in his Final Report, but for which he did not make specific recommendations.

They include:

The Government has also committed to implementing four additional measures to strengthen ASIC’s enforcement powers, as recommended by the ASIC Enforcement Review Taskforce in 2017.

Our response of more than 70 commitments represents a truly comprehensive package of reforms to:

The Australian community and those who have suffered from financial sector misconduct expect and deserve Commissioner Hayne’s recommendations to be implemented consistent with our response, and that’s what we will do.

Implementation is already substantially under way

The Government has made significant progress in implementing its response. We have already implemented 15 of our commitments, 8 of which relate to Commissioner Hayne’s recommendations and 7 to our additional commitments. We have 24 streams of work under way.

Commitments already implemented include:

We have also moved swiftly to act on the Royal Commission’s recommendation to conduct an APRA Capability Review. The Review, chaired by Mr Graeme Samuel AC, was released on 17 July and made 24 recommendations, of which 19 were directed to APRA and the remaining 5 were directed to the Government.

Implementing a complex and wide-ranging financial services reform agenda 

Commissioner Hayne has advocated for changes to be made ‘carefully and simply’.

He stated that ‘adding a new layer of regulation will not assist’ but will only add to ‘what is already a complex regulatory regime’.

Of the recommendations directed to Government, 44 require primary or subordinate legislation resulting in amendments to over 15 different Acts and regulations.

As I said in my introduction, the Royal Commission reforms mark the largest and most comprehensive corporate and financial services law reform process since the 1990s.

Over the next 18 months these reforms will dominate the Treasury’s legislative program, with the work required equivalent to almost three-quarters of its current program. It’s worth noting that Treasury’s legislative program is the largest across Government, and has consistently represented a quarter of the Government’s overall legislative agenda.

The challenges in implementing complex large-scale reform can also be seen with some past financial reform efforts:

Irrespective, the Government recognises that despite its scale, implementing the Royal Commission on a timeframe consistent with prior reforms is simply not consistent with the community’s expectations.

The Financial Services Royal Commission Implementation Roadmap

And so today, I’m pleased to release the Government’s Financial Services Royal Commission Implementation Roadmap.

The Roadmap represents the Government’s commitment to deliver its response to the Royal Commission. It sets out a timeline for implementing each of the Government’s commitments and in doing so, provides clarity and certainty to consumers, industry and regulators.

Under the Roadmap:

To achieve our implementation timetable, further resources will be provided to the Financial Services Reform Taskforce within Treasury for the development of legislation, coordination and monitoring of progress, and to commence work on simplifying the law as recommended by Commission Hayne. Additional resourcing will also be provided to the Office of Parliamentary Counsel for legislative drafting.

For measures contained in legislation introduced into the Parliament before 1 July next year, the Government expects the majority to commence by 1 July 2020 or from Royal Assent.

Many of these will be measures to strengthen the financial regulators’ powers and their effectiveness. These should, of course, start as soon as possible.

In other cases, the problems that the recommendations are aimed at are well known to industry and have been telegraphed well in advance. For these recommendations, industry need not wait – indeed, should not wait. Some in the industry have already moved pre-emptively in a number of areas and I encourage others to follow.

Implicit in our implementation plan is that consultation on individual measures will be focussed on how the measures can best be implemented, not whether they should be implemented. The Royal Commission’s recommendations and the Government’s response are clear, now is the time for action, not more debate.

Achieving this ambitious timetable will require the Parliament to deal with the reforms constructively and with a sense of urgency. My undertaking today is that we will work closely with the Opposition to ensure they are properly briefed on each piece of legislation before being introduced into Parliament. This will begin with the offer of a briefing by Treasury on the Implementation Plan.

Given both the Government and Opposition agreed to act on the Commission’s recommendations, we expect to achieve passage of relevant legislation without undue delays.

The financial regulators also have an important role to play 

Just as important as the actions we will take is the role financial regulators will play in driving change in the financial sector.

As Commissioner Hayne stated: ‘too often, financial services entities that broke the law were not properly held to account’.

The Royal Commission made 12 recommendations to the regulators, aimed at strengthening their regulatory oversight of the sector and approaches to enforcement.

Shortly after the release of the Final Report, I wrote to the APRA Chair, Mr Wayne Byres, and the ASIC Chair, Mr James Shipton, to underline my expectation that they consider seriously and respond appropriately to the findings and recommendations of the Royal Commission.

The Government also announced in the 2019-20 Budget that it is providing over $550 million of additional resourcing to ASIC and APRA. This additional resourcing will allow ASIC and APRA to strengthen and intensify their approach to enforcement and take on expanded responsibilities to tackle misconduct in the financial sector.

Both ASIC and APRA have subsequently released their plans for actions they will take in response to the Royal Commission. Notably, both regulators have moved quickly to adopt tougher enforcement stances that will more publicly and forcefully denounce misconduct.

The Government expects ASIC and APRA to swiftly implement these recommendations in a manner consistent with the Government’s own implementation roadmap.

Primary responsibility for improving conduct lies with financial institutions.

While changes to the regulatory framework along with effective action by the regulators are important, as Commissioner Hayne made clear:

‘primary responsibility for misconduct in the financial services industry lies with the entities concerned and those who managed and controlled those entities: their boards and senior management.’

It is imperative that the financial services industry takes action now to:

This includes industry being open and transparent in their dealings with financial regulators and AFCA.

I have been watching closely the progress the industry has been making in relation to the implementation of recommendations directed to it. I expect them to also align with the urgency and priority the Government is giving to this task. The Government and Australians more broadly will not tolerate anything less.

To ensure there is transparency in relation to the actions being taken by industry and that they are held accountable for these actions, following a recent request by the Government, the House of Representatives Standing Committee on Economics will inquire into progress made by major financial institutions, including the four major banks, and leading financial services industry associations in implementing the recommendations of the Royal Commission.

As previously announced, the Government will also establish an independent review in three years’ time to assess the extent to which changes in industry practices have led to improved consumer outcomes and the need for further reform.

There will be a similar review into the regulators’ actions, to be undertaken by the new financial regulator oversight authority that the Royal Commission recommended, and the Government agreed, be established.

For the Government, these two reviews will be a point to critically and systematically appraise how far the industry as well as the regulators have come in addressing the issues raised by the Royal Commission.

Closing Remarks

Delivering on Commissioner Hayne’s recommendations and restoring trust in Australia’s financial system is a key part of the Morrison Government’s economic plan.

We all want to see an improved financial system.

One where we have engaged and confident consumers and small businesses.

One where we have financial institutions providing the products and services that Australians want and need.

A system supported by an efficient and effective regulatory framework and regulators, that embodies the simple yet compelling norms of conduct articulated by Commissioner Hayne:

There is no understating the importance of the Royal Commission and its findings to the critical task of restoring trust in Australia’s financial institutions.

Commissioner Hayne was clear in his diagnosis of the problem and deliberate in his prescription of the solution.

This roadmap released by the Government today underlines our determination to bring about change to the financial system by implementing the Commission’s recommendations both swiftly and effectively.


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