Banks face an avalanche of regulation
A top law firm has warned that Australia’s banks and finance companies are staring at a tsunami of legislative change in coming months and many smaller organisations are at risk of not complying,
Norton Rose Fulbright said the full implications of four separate but inter-connected regulatory and legislative changes all hitting the sector at the same time are only now emerging.
“The sector has done an admirable job of managing the Covid crisis in its customers’ interests but, having navigated that, the full scale of what’s in front of it is beginning to dawn for some,”
says the firm’s banking regulatory partner, Claudine Salameh.
“It’s the perfect regulatory reform storm, largely coming out of the Hayne royal commission recommendations of over two years ago.”
In early October, changes to customer remediation, complaints management, breach reporting, and new design and distribution obligations will all be enacted she said. Salameh added the new regulations carry significant reputational financial and legal risks for banks and finance companies that will take time to properly manage.
“The regulatory changes are interconnected, so a breach in one area of an organisation could have significant flow-on effects in others and have much wider impacts,”
“Boards and directors will also need to consider making more financial provisions for potential fines under the new regimes and this will impact an institution’s market disclosure obligations."
"New entrants might struggle"
The transparency some of the regulatory changes brings also risks an upsurge in class actions in the finance sector, she went on to say, as plaintiff law firms get access to more detailed public information on breaches and complaints.
In her view, some smaller financial companies and recent entrants to the Australian market - that didn’t exist when the royal commission into the sector’s conduct was underway - may struggle to be ready with just five months to go.
“It is highly unlikely the government will be willing to delay implementation despite the uncertainty the sector has had to manage throughout the pandemic,”
“Any financial organisation, executive team, or board that hasn’t got their head around the changes and implications are rapidly running out of time.”