Legislation to Establish CSLR Introduced

Legislation to establish the Compensation Scheme of Last Resort and the Financial Accountability Regime, has been introduced into Parliament.

A media release from the Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume,says this represents the final tranche of legislation to implement the recommendations made by the Banking Royal Commission.

It implements a further six recommendations of the Royal Commission.

Compensation Scheme of Last Resort (recommendation 7.1)

The statement says the establishment of the CSLR will “…support ongoing confidence in the financial system’s dispute resolution framework by facilitating the payment of up to $150,000 in compensation for personal advice, credit intermediation, securities dealing and credit provision to eligible consumers who have received a relevant determination for compensation from the Australian Financial Complaints Authority which remains unpaid.”

It says that to allow the scheme to commence as soon as possible, the Government will fund its establishment and contribute to scheme costs in the first year.

“This will allow the scheme to start paying claims from 1 July 2022. Going forward, the scheme will be fully industry funded through a levy on relevant financial service and credit licensees.”

The statement adds that to ensure that the CSLR truly operates as a scheme of last resort, “…the Government will also consult on proposals to enhance the effectiveness of professional indemnity insurance in responding to compensation claims.”

Financial Accountability Regime (recommendations 3.9, 4.12, 6.6, 6.7 and 6.8)

The statement also notes that the Financial Accountability Regime extends the Banking Executive Accountability Regime to all APRA regulated entities and provides for joint administration between APRA and ASIC.

It says the FAR imposes a “…strengthened responsibility and accountability framework that will ensure directors and senior executives will be held accountable for their decisions and conduct.

…The Government’s FAR increases accountability across the banking, insurance and superannuation sector …

“The Government’s FAR increases accountability across the banking, insurance and superannuation sector and will improve the governance of these entities. In doing so, the FAR gives Australians greater confidence that where misconduct occurs those responsible will be held accountable.”

The statement adds that the FAR will apply to the banking sector from the later of 1 July 2022 or six months after the commencement of the legislation.

“For the insurance and superannuation sectors, the FAR will apply from the later of 1 July 2023 or 18 months after commencement of the legislation.”

The Government will continue to consult on the legislation as part of Committee processes as it proceeds through the Parliament.

The Minister states that despite the significant challenges posed by Covid‑19, through the introduction of this legislation, the Government has now met the legislative commitments it outlined in its roadmap for the implementation of the Hayne Royal Commission.

Remaining recommendations, which include conducting several reviews in 2022, will be implemented consistent with the Government’s prior commitments.