Australia’s banking watchdog is throwing extra resources at ensuring the nation’s financial system copes with the most significant economic downturn since the Great Depression.
Australian Prudential Regulation Authority chair Wayne Byres assured the House of Representatives economics committee the financial system went into the crisis as a result of the COVID-19 pandemic in a “fundamentally solid position”.
“Experience in Australia and elsewhere tells us that when the broader economy encounters severe stress, so does the financial system,” Mr Byres told the virtual hearing on Wednesday.
“We have therefore deployed resources to increase the intensity of our stress testing and have been refining and improving our contingency planning. We need to be prepared, and agile, to manage pressure points as they inevitably arise.”
One of the responses of the federal government to the first recession in nearly 30 years is allowing people an early withdrawal from their superannuation accounts in cases of hardship.
About $30 billion has so far been withdrawn, with people having been allowed to take out $10,000 both in the financial year just gone and the present one.
The committee heard this withdrawal could come at a cost to those who did not take advantage of the scheme.
“Quite clearly funds are going to have to adjust investment portfolios to deal with the current situation … that will impact on investment returns,” Mr Byres said.
“Exactly what that cost is going to be will obviously depend on how different asset classes perform over the next little while.”
Earlier, Australia’s corporate watchdog told the committee it has become frustrated with financial institutions dragging their feet in repaying wronged customers, more than 18 months on from the damning banking royal commission.
The Australian Securities and Investments Commission is issuing new guidelines to speed up the process.
ASIC deputy chair Karen Chester told the committee she was “disappointed with the efficiency with which some of these remediation programs are being deployed”.
But Ms Chester is hopeful the guidelines will deal with the problem.
ASIC is overseeing 89 remediation activities across the financial services and wealth management sectors.
Ms Chester said $828 million had been returned to customers since the royal commission.
ASIC expects at least $2.99 billion to be returned to more than two million customers during the next 18 months.
Ms Chester believes banks and other financial services firms can do a much better job.
“Not just in terms of the timeliness but also setting things right and sometimes erring on the side of generosity in setting things right to get the money out more quickly,” she told the hearing.