As a part of the 2016 Federal Budget, the Government announced a $127 million package of reforms to strengthen ASIC. However, the costs of the reforms package will be recovered through a new industry funding model, to commence in the second half of 2017, replacing the current taxpayer funded model.
Switching to an industry funding model was something which was recommended by David Murray’s Financial System Inquiry (FSI) in 2014.
Speaking to Your Investment Property Magazine's sister publication Australian Broker, the FBAA’s Peter White agrees an industry funding model is a positive move for the Australian economy.
“It is a good thing for the economy and how things impact taxpayers,” White said. “Historically it has been a taxpayer funding model so the new model will put less pressure on the taxpayer and allow taxpayer money to be used for other things.”
White says getting those industries that create the need for regulation to foot the bill is not an “unreasonable process” however he says the association is concerned how banks, who will bear the majority of the cost, will pass the extra expense on.
“When this starts to impact lenders — and with lenders the fee could be a quarter of a million dollars or more — I'm concerned as to how lenders will treat it.
“Will they pass it back to borrowers by increasing fees or interest rates? Or will they penalise the broker somehow and potentially pull back on commissions? There are a lot of questions as to how will the lender treat this.”
All four major banks recently responded to the government’s proposal, saying they will not pass on the costs of the levy onto consumers through increased interest rates. This followed treasurer Scott Morrison's comments that he would be “furious” should any banks attempt to pass the costs onto customers.
However, White says it is unlikely the banks will absorb that cost themselves.
“It will get adjusted somewhere. The reality is lenders will not erode their returns to shareholders. It is going to come somewhere and it could be hidden in a myriad of different places, who knows?
“But my concern is how they will treat it and we want them to be transparent about that.”
