2020 is poised to be a year of extraordinary change and reform in the financial services sector as the wake of the Financial Services Royal Commission collides with the economic crisis from the COVID-19 pandemic.
To understand more about the changes and issues impacting the industry, I spoke with Liam Hennessy, Financial Services and Regulatory Director at Gadens, and author of industry blog Australian Regulators Weekly Wrap.
“We had an incredibly full legislative timeline this year in the wake of the Royal Commission,” said Liam.
“It was always going to be an incredibly tough year from a regulatory perspective,” he said.
The banking sector has been particularly hit hard by the economic impact of the pandemic with a massive increase in the volume of financial hardship requests and a commitment to supporting customers during this extraordinary period of time.
Fortunately, from a reform perspective, “The government has now come out and said you’ve got an extra six months to put these massive reforms in play,” said Liam.
The Financial Services industry is highly regulated, and whilst the regulatory reforms are deferred, the regulators are still watching closely, with ASIC cautioning that it will be refocusing its efforts towards monitoring and investigating instances of COVID-19 related breaches of regulatory requirements.
One of the key problems is that COVID is creating volume and time challenges for banks and member banks especially as their desire to help and support their customers, needs to be balanced with compliance of regulations such as responsible lending obligations.
Whilst many of the regulators have been providing guidance to industry and member associations, there is more that can be done.
“If you’re going to be a regulator with all of these awesome enforcement powers, then you really owe a duty to the regulated population to very clearly convey your expectations,” said Liam.
According to Liam, AFCA (Australian Financial Complaints Authority) is an entity that should be providing “practical guidance on what it sees, how it approaches fairness and reasonableness in the context of responsible lending and deferrals and all of these issues that are likely to cause a lot of complaints in 9 months, 12 months, 18 months time, when some businesses ultimately don’t recover.”
“Guidance from regulators as to how they should approach these broad concepts of reasonableness and fairness, beyond axiomatic statements that ‘it’s all flexible and situation depending’, would be very useful,” said Liam.
The lobbying of regulators will continue and may even ramp up as further clarification on expectations is required.
“A lot of organisations either individually or as a collective, together with their advisors and law firms, have been engaged in their own lobbying activity,” highlighted Liam.
View the full video interview with Liam Hennessy below and to stay up to date with our Fireside Chat series follow Lawcadia on LinkedIn or subscribe to our newsletters using the form at the bottom of this page.
Lawcadia and Gadens have developed a COVID-19 Legal Workflow to help in-house legal teams manage the breadth and scale of pandemic-related legal issues. This solution is available with pre-configured workflows and can be deployed in a matter of days