Thanks to Shorten's stunt, Medcraft is only the second commissioner in the history of ASIC to have his term extended. The only other one was Alan Cameron who headed ASIC from 1993 to 2000.

Medcraft's extension is only for 18 months but it will provide the necessary leadership as ASIC implements the new governance model recommended by the Chester Productivity Commission review of ASIC's capabilities.

The government had been sitting on the Chester review for months and probably would have left it on a shelf until after the election.

Chester's review came up with some odd findings and that can probably be blamed on the lack of involvement of any former regulators on its review panel.

Medcraft is only the second commissioner in the history of ASIC to have his term extended.

At a time when the banks are under attack for illegal and unethical conduct, the Chester review accused ASIC of being too reactive to financial planning scandals and not spending enough time on long term strategic thinking.

Chester and her colleagues obviously have little understanding of the politics of regulating Australia's financial system. There is an expectation in Canberra that ASIC must react to the complaints made to politicians by their constituents.

The Chester review highlighted the large expectation gap between what ASIC officers thought about their capabilities in relation to identifying risks in the financial system (95 per cent) and what stakeholders thought of their performance in this area (23 per cent). ASIC's deputy chairman Peter Kell said this highlighted the need for improved communication by the regulator.


A review of ASIC's performance by the Senate Economics Reference Committee last year found that oversight of ASIC by parliament was working well but the Chester review did not.

David Rowe

Shorten said on Wednesday at a press conference that tens of thousands of Australians are being ripped off every year by the banks. That fits with the fact that the Financial Ombudsman Service receives about 30,000 complaints every year while the Superannuation Complaints Tribunal receives about 1500 complaints a year.

Both the bodies have come under criticism for the sluggish handling of complaints and lack of resources. Also, the FOS has been unable to handle small business complaints.

The government is directly addressing these problems by extending the jurisdiction of FOS and reviewing its monetary limits and compensation caps. A wider range of small business loans will be able to be considered by FOS. The SCT will receive $5.2 million to deal with legacy complaints.

An industry wide review of external dispute resolution is another worthy government move but it will not be liked by lawyers who have done well out of the scandals over the past five years.

Opposition Leader Bill Shorten says Labor supports regional processing in offshore facilities. Alex Ellinghausen

Shorten's royal commission will be the catalyst for ensuring ASIC's resources and powers are enhanced.


ASIC to gain 150 staff

The additional $61 million capital expenditure to enhance ASIC's data analytics and surveillance was long overdue. ASIC's computer systems are said to be held together with string at a time when the biggest threats to the consumers and the financial system are in the cyber world.

ASIC plans to implement the Microsoft Dynamics CRM software platform which will allow it to improve its understanding of complaints about ASIC.

Without the royal commission call, ASIC would never have been given an additional $57 million "to enable increased surveillance and enforcement on an ongoing basis in the areas of financial advice, responsible lending, life insurance and breach reporting".

ASIC, which spends 70 per cent of its annual budget on enforcement, was already working on a project to review the life insurance claims payment practices in Australia but it was far too big a task for its existing resources.

Now that it has the appropriate funding it will be able to go well beyond the initial focus on the Commonwealth Bank of Australia's CommInsure business.

ASIC can probably hire another 150 people using the rule of thumb that each person is paid about $100,000. But being freed of the strictures of the Public Service Act will allow it to hire more highly qualified people from the private sector.

About 80 per cent of ASIC's 1500 staff are already hired from the private sector.


The Australian Prudential Regulation Authority was freed from the Public Service Act years ago and it helped lifted the quality of staff.

Details of the user pays funding model for ASIC will be worked out in consultation with industry. But Medcraft made it clear at a press conference on Wednesday that the four major banks would be paying the lion's share simply because they dominate the financial system.

An additional ASIC commissioner with "experience in the prosecution of crimes in the financial services industry" should streamline the planning and strategy behind big cases. This marks a return to the system a decade ago when ASIC had a national director, enforcement.

ASIC is already an active user of a range of enforcement tools outside of the court system including infringement notices and enforceable undertakings. It will now be more proactive in its enforcement activity.

The new commissioner will take ASIC's total commissioner positions to six which is just behind the Australian Competition and Consumer Commission which has seven commissioners. But unlike the ACCC each of the ASIC commissioners will continue to have line management responsibility.

ASIC does not get much credit for the evolution of its enforcement activities which have been extended in recent years to include large amounts of compensation. It has been responsible for enforcing about $600 million in compensation over the past five years.

If Shorten is elected he will obviously meet his promise to hold a royal commission but the wheels have already been put in place to fix most of the shortcomings that have existed.

The reality of a royal commission is that if Labor is elected it would probably release the terms of reference and appoint a retired judge by January 2017. It is at least a two year exercise at a cost of $53 million but it would probably need to be extended by a further six to 12 months given the scope and breadth of the inquiry.

In other words, we are talking about a set of recommendations by mid to late 2019. That suggests a reform agenda being implemented around 2020. Realistically, the reforms would probably be along the lines of those being implemented by the federal government now.

Labor Senator Sam Dastyari provided some clarity about the purpose of the royal commission when he told the ABC on Wednesday that it would "allow the victims' stories to be told". That will not please those who want it to be a vehicle for achieving compensation for funds lost, loans written off or insurance policies not paid.