The Royal Commission has continued its shake-up of the Australian banking system, as the Australian Securities and Investments Commission (ASIC) has received bold new powers to regulate the choice of executive staff.

This news comes on the back of the continuing inquiry into misconduct throughout the major banks, with excessive fees charged for advice that they did not provide and some costs even mandated to deceased customers.

Regulatory pressure is increasing for action on the systemic issues involving the major banks over the last few years, with more stories continuing to emerge from the scandal-hit sector. ASIC Chairman James Shipton said that the commission now has the power to go “onsite” and will be doing so.

Shipton said that these “large financial institutions” should be expecting “supervisory officers embedded for significant periods of time” to influence behavior and change the way that processes operate in some boardroom decisions.

Federal funding will increase to allow for the building of supervisory teams over the next two years, with an additional AUD $70m now in the pot. The funding will feed into various bank and wealth management offices.

When pressed on how long this might take, Shipton told reporters that it could happen imminently, but it “may be months”. The length of time in question will entirely depend on which projects, tasks and level of harm that the ASIC is working to sort out. Some banks and businesses will therefore be easier to handle than others.

The move has been received with a mixture of apprehension and disappointment by some business leaders, as they expected the current center-right government to rely more on the market rather than stepping in and influencing on the ground. However, it is arguable that the government needs to do a great deal in order to show the public that it is going to be strong on this issue.

With public trust at a low in regard to some of the details emerging from the inquiry, key steps will have to occur to exact some lasting change and restore good relationships between banks and consumers. 

The government initially refused to set up quasi-judiciary powers; however, as more details come out, the issue is getting harder to ignore.

Stricter controls and regulation as well as additional compliance costs may only be the beginning for some of these financial institutions, with regulatory deception as well as misconduct in relation to seriously misleading consumers alleged during the inquiry. 

The continuing developments have seen major banks take a huge hit off their value, with a sizeable AUD $26bn removed by investors since the stories started to break earlier this year. Restoring some level of trust and allowing the regulators to implement efficient and trustworthy measures may enable the banks to start building up their value again to benefit the national economy. 

Allowing regulators inside banks would also move Australia more in line with several other nations with a strong financial sector, including the UK, Hong Kong and the US, according to Treasurer Scott Morrison.

The ASIC is now set to look deeper into Australia’s pension funds, and the government is also looking into stricter charges for corporate crimes, including doubling the maximum prison sentence. The inquiry is ongoing.