Australian Government roadmap for implementing a response to the Financial Services Royal Commission
The Australian Treasury has published a roadmap outlining its plan for implementation of its response to the recommendations of Hon Justice Hayne resulting from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Hayne Royal Commission).
Our Australian MinterEllison colleagues’ summary of the Implementation Roadmap is here.
A copy of the Implementation Roadmap is also available, here.
Who needs to read MinterEllison’s summary? Why?
The MinterEllison summary (ME Summary) should be read by those operating in or regulating the New Zealand financial services sector, in particular anyone who has responsibility for conduct and culture-related matters.
Developments in Australia flowing out of the Hayne Royal Commission continue to attract attention in New Zealand from government, regulators and the media, as well as New Zealand financial institutions. The ME Summary provides a succinct, easy to read, way of understanding the Australian developments.
What does it cover?
The ME Summary outlines the Australian Federal Government’s timelines and plan for implementation of its responses to the Hayne Royal Commission’s recommendations.
The Implementation Roadmap follows on from the Australian Government’s February 2019 response, where they committed to take action on all 76 of the Hayne Royal Commission’s recommendations, including the 54 directed at government. At the time, the Australian Government also announced a further 18 commitments. The Implementation Roadmap now lays out details for what the Government considers an ‘ambitious’ timetable for action. Of note:
- The Treasurer has said that more than 50 of 54 commitments will have been implemented or be subject to legislation by mid-2020 and the remaining four recommendations needing legislation will have been introduced by the end of 2020.
- The Treasurer’s expectation is that the majority of measures contained in legislation introduced into the Parliament before 1 July next year, will commence by 1 July 2020 (or from the date of Assent).
- An independent review into the effectiveness of the changes will be held in three years’ time.
The Australian Treasurer commented that their Implementation Roadmap plan represents the most comprehensive corporate and financial services law reform process (in Australia) since the 1990s, when the Corporate Law Economic Reform Program began there.
Our view: What about New Zealand?
The Hayne Royal Commission has already had a significant impact on the New Zealand financial services industry, and we expect the Australian government’s response will likewise continue to attract attention in New Zealand from government, regulators and the media, as well as New Zealand financial intuitions.
The FMA/RBNZ’s Conduct and Culture reviews into banks and life insurers have been well-publicised, with both categories of entities having now reported to the regulators and produced action plans to implement changes. The removal of sales incentives for bank salespeople and their managers is a notable change. The FMA/RBNZ continue to monitor banks and life insurers' implementation of their action plans to address issues identified, and we expect that oversight to be informed by Australian developments.
Change to the New Zealand legislative and regulatory framework is also coming, again influenced in part by Australian experience.
The Financial Services Legislation Amendment Act 2019 (FSLAA), will introduce a new financial advice regime which is expected to come into effect in June 2020. The industry is still awaiting consultation by MBIE on draft regulations on new disclosure requirements for consumers under FSLAA. This was originally expected to commence in Q2, 2019 – it may be MBIE was waiting for the Australian government response, to see whether that had any insights for them. In any event, the pressure is now on to be ready for the June 2020 start of the FSLAA regime.
In addition, MBIE is currently considering submissions or undertaking policy work on the Options Papers for:
- The Conduct of Financial Institutions, with a view to legislation being introduced by the end of 2019. See our newsletter here. The options raised include entity licensing, executive accountability, imposing legal duties on banks and insurers, e.g. to prioritise customers' interests, restrictions on products that lead to poor customer outcomes, managing remuneration models that promote good customer outcomes, new whistle-blowing and reporting requirements, duties to ensure insurance claims are handled fairly, timely and transparently, and giving greater power to the FMA.
- The Insurance Contract Law review, with a view to legislation being introduced around mid-2020. See our newsletter here. The review raises a wide range of options intended to ensure that insurers and people getting insurance are well-informed and able to transact with confidence, ensure interactions are fair, efficient and transparent, minimise barriers to insurers providing insurance, and protect consumers’ interests.
And the Credit Contracts Legislation Amendment Bill 2019 is still before Parliament. Amongst other things, that Bill proposes strengthening responsible lending obligations and imposing personal duties on directors and senior managers to exercise due diligence to ensure compliance with the Credit Contracts and Consumer Finance Act 2003. See our newsletter here.
It remains to be seen how far-reaching the New Zealand changes will be, but we expect both MBIE and Parliament will have regard to the Australian developments.
Please contact one of our experts if you have any queries regarding the impact in New Zealand of the Hayne Royal Commission, the FMA/RBNZ Conduct and Culture review or likely legislative change in the financial services sector in New Zealand. In addition, we can introduce you to our colleagues at ME to discuss the Australian perspective.