The Australian Securities & Investments Commission (ASIC) is just not doing its job in regulating the financial industry, said Patrick McConnell, honorary fellow at Macquarie University’s Applied Finance Centre.
In an interview with Australian Broker
, McConnell said that to regain its credibility, all ASIC had to do was simply fulfil its role.
“They should be doing their job of regulating misconduct by banks,” he said. “[But] they’re just not doing this.”
The $2.5 million fine given by ASIC to National Australia Bank (NAB) and the Commonwealth Bank of Australia (CBA) for inappropriate conduct over the banks’ wholesale spot foreign exchange desks was a joke, McConnell said.
“The message that that sent was completely wrong. It means ‘We can do whatever we like and eventually ASIC will fold’.”
McConnell continued, saying that he wouldn’t be surprised if the regulator also folded in the ongoing bank bill swap rate (BBSW) case against Westpac, the Australia and New Zealand Banking Group (ANZ) and NAB.
Taking the banks to court in the first place “was a really bad decision” by ASIC, he said.
“They’re never going to outgun the big banks in the lawyer space. They just don’t have enough money.”
The banks involved have already started to drag this out anyway, he said, which gives them enough time to coordinate their defence and bide their time until settlement, he said.
“That was just a bad, bad, bad mistake.”
Despite making this decision however, McConnell suggested ASIC should go back and fine the banks directly.
There was nothing to stop ASIC from taking this action, he added, given that there was precedent for this. He pointed to the 2011 payment protection insurance (PPI) scandal in the UK. The case has led to the country’s four biggest banks paying more than £40 billion ($65.3 billion) in fines, compensation and legal expenses.
After the UK’s Financial Services Authority (FSA) set down what the banks were required to do as a result of the scandal, the banks took the case all the way to the High Court where it was rejected.
“And they folded,” he said. “Effectively the banks sued the FSA and lost.”
In essence the current situation with the BBSW was a “pathetic situation” for ASIC to get itself into, McConnell said.
“It doesn’t do anything for ASIC’s credibility. It doesn’t do anything for good regulation. It doesn’t do anything for anybody actually."
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