The Australian government is planning to cut funding for its corporate watchdog, despite the regulator warning that a lack of resources has already limited its effectiveness. Reports in Reuters said the Australian Securities and Investment Commission (ASIC) could see cuts of 8 percent over the next four years, according to government budget documents.
Thomas Clarke, a professor at the University of Technology, Sydney business school, said, “These cuts are not large cuts but they're significant to the public's mind and they're significant for the morale and strength of resolve of the regulators concerned.”
According to Reuters, the ASIC recently warned that "limited resources" hampered its ability to identify long-running misconduct in Australia's financial sector, revealed via an ongoing Royal Commission inquiry.
“One of the principal lessons of the Royal Commission in recent weeks has been ASIC's toothless handling of the banks over the last ten years,” Clarke added. “I think the public will interpret this budget cut as giving up on ASIC to some extent, which is exactly the wrong signal.”
Another expert, Melbourne University professor of corporate law Ian Ramsay, told Reuters that the cuts are “unfortunate.”
“If anything, we would expect more work from ASIC in terms of investigations and possible prosecutions,” he said.
In addition, a spokesperson for Kelly O’Dwyer, Australia's Minister for Revenue and Financial Services, said in a statement that “funding and personnel fluctuates from time to time” for the ASIC.
Last month, the Royal Commission probed the nation's financial services industry and found "unconscionable" conduct by the nation's largest listed wealth manager, AMP, in addition to various major banks. Such banks included the Commonwealth Bank of Australia, which was announced in the Commission's preliminary findings of the investigation.
Government watchdogs have faced criticism in recent months for their inability to effectively crack down on bank misconduct after the government initially decided not to open an investigation in the banking sector. Criticism from lawmakers eventually led to the Minister for Finance and Revenue to launch the probe.