ASIC undertakings probed
Critics say enforceable undertakings from the financial regulator allow big banks to do the crime, but negotiate the time.
Regulator ASIC often uses enforceable undertakings to secure agreements that prevent lengthy and costly court action to remedy problems in the financial sector.
ASIC was asked about the undertakings at this week’s hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“To your knowledge,” senior counsel assisting, Rowena Orr QC asked, “are enforceable undertakings with ASIC heavily negotiated?”.
“Yes, they are,” said ASIC's Louise Macaulay.
“Is ASIC concerned about a public perception of ASIC negotiating and reaching consensus with financial services entities about appropriate sanctions for their misconduct?” Ms Orr asked.
“Yes, I'm aware of that public view,” Ms Macaulay said.
Swinburne Law School corporate governance research fellow Helen Bird says ASIC can easily find itself relying on the institutions it is meant to be watching over.
“From the viewpoint of the public, they appear to be deals done behind closed doors, between regulators and parties,” she said.
“We don't see what goes on inside those rooms.”
But associate professor Andrew Godwin from the Melbourne Law School says the undertakings can be a cost-effective way to achieve compliance and enforce the rules.
“But the question is whether it's significant in changing the mindset and changing the culture of institutions,” he said.
“The public thinks the punishment doesn't fit the crime — and that's fitting when you see the huge profits the banks are making and the disproportionately low amounts they seem to be paying pursuant to these undertakings.”