Bank employees who break the rules would be publicly named and shamed within five days under a radical proposal advanced by a parliamentary committee examining the big four banks.
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And to further protect customers, the banking inquiry report has suggested a series of other changes that would make it easier for new banks to be started, see an already-promised Banking and Financial Sector Tribunal established by July 1, 2017 and see the competition regulator tasked with examining competition rules in the sector every six months.
But Labor and the Greens labelled the government-dominated inquiry and report a "stage-managed circus" that exposed the "cosy relationship" the government enjoyed with the big four banks.
A well-placed Coalition government source said while the tribunal, a proposal for ASIC to collect data about internal dispute resolution in banks and other measures may be adopted, the "name and shame" proposal was unlikely to be adopted for fear of unintended consequences.
The Australian Bankers' Association, which represents 25 banks, said it supported greater transparency in the banking sector, but it was unrealistic to think banks would be able to report on breaches within five days.
Other recommendations of the House Economics committee report, released on Thursday, included:
- Ensuring the banks pay for the cost of the new banking Tribunal.
- Consider whether new account switching tools are needed to make it easier to change banks.
- Public reporting for the wealth management sector, managed by ASIC, to be set up by the end of 2017.
Liberal committee chairman David Coleman said in the report that the culture in Australia's financial sector must be reformed, that the banking sector was an oligopoly that used its power to protect shareholders and argued the big four banks had not always acted in the best interests of their customers.
"While they have remained financially strong, Australia's major banks have let Australians down too frequently in too many other ways," he said.
"While significant changes have been announced that will better protect consumers, not enough has been done to force banks' senior leaders to change their behaviour. When consumers are continually let down, senior executives should go."
"We need to shine a bright and public light on senior executives when banks breach the trust of consumers," he told Parliament.
To that end, Mr Coleman also foreshadowed that bank chiefs will be hauled back before Parliament in the first quarter of next year, soon after the Reserve Bank appears on February 24, to keep up pressure on the big four banks.
Labor MP Matt Thistlethwaite said the inquiry was only held to head off a royal commission into the banks — which should still be held to examine illegal and unethical behaviour — and that "it has been a stage managed circus from its beginnings".
"The banks have ridden roughshod over their customers, the Australian people, and the Turnbull Government is providing cover to protect the banking industry from further scrutiny. Change in this industry only happens when you shine a light on those with power," he said.
"It is clearer now than ever, a broader inquiry is needed."
Greens MP Adam Bandt said the hearings confirmed the big four banks believed there was nothing wrong with their business model and that it had "reinforced the need for a wide-ranging Royal Commission into the big four banks and the broader financial sector".
Kat Lane, acting coordinator for the Financial Rights Legal Centre, said the report failed to listen to consumer groups, who raised concerns about a tribunal early on.
A Westpac spokesperson said: "While we may not agree with all aspects of the report, the committee can play a constructive role in building on industry reforms that are currently being implemented."A spokesperson for National Australia Bank said it would consider the recommendations and the government's response.
The report was released after the heads of Australia's big four banks appeared for a combined total of about 17 hours in parliament last month.
Prime Minister Malcolm Turnbull announced the hearings amid rising pressure from Labor and some MPs on his own side, to hold a banking royal commission and has flagged the new banking tribunal.
- with Georgia Wilkins
