ABA statement on proposed reforms to the Compensation Scheme of Last Resort

The ABA welcomes government consultations on proposals to enhance consumer protections and reform the Compensation Scheme of Last Resort (CSLR) to ensure it is financially viable into the future.

ABA CEO Simon Birmingham said the current model was not operating as originally intended and banks supported steps to reduce investment losses and redesign CSLR to make it more sustainable.

“Banks support a genuine scheme of last resort that compensates victims when they have suffered financial loss due to misconduct,” Mr Birmingham said.

“The current model is no longer working and banks welcome steps by Minister Mulino to ensure it becomes more sustainable, including stemming the incidence of losses, containing claims and better aligning costs to sectors generating losses.”

Mr Birmingham said reforms must focus on protecting consumers that most need support and incentivising high standards of conduct in each of the financial services sectors.

“For markets to work effectively risk cannot be eliminated from the pursuit of higher returns,” Mr Birmingham said.

“The CSLR must operate as a genuine scheme of last resort for everyday Australians, not the first port of call for well-heeled investors to recoup losses from sophisticated, higher-risk strategies that have not delivered.

“Reform options put forward in this consultation to reduce losses and put the scheme on a more sustainable footing will ensure it remains there to protect everyday Australians against genuine misconduct when other avenues have been exhausted.

“The ABA continues to urge the government to be ambitious and fast moving in delivering solutions to fix this scheme, and together with our member banks we look forward to engaging on the government’s proposals to ensure its long-term financial sustainability.”