The corporate regulator, ASIC, has announced a review into banking programs aimed at primary school children.
School banking programs involve a bank having a relationship with a school to offer deposit products to their students. These students are encouraged to establish bank accounts and make ongoing deposits into those accounts at the school. Examples include the Commonwealth Bank’s Dollarmites program.
The Dollarmites program has been engulfed in scandal during the royal commission.
A Fairfax Media investigation revealed that accounts were established to meet sales and incentive targets.
ASIC plans to evaluate how these programs are implemented and how they are marketed to school communities; consider how students are engaging with these programs and the accounts including after they leave school; and form principles for appropriate conduct and good practice in this area.
Essentially, the corporate regulator is setting out to assess if the programs are fit for the purpose of encouraging financial literacy for students, or if they are too heavily skewed to the banks’ targets.
“Transparency around school banking programs is important. ASIC wants to understand the motivations and behaviours around school banking programs to ensure they ultimately serve the interests of young Australians, and to enable school communities to have an understanding of the potential impact of these programs,” said ASIC deputy chair Peter Kell.
Regulator under pressure
ASIC is under intense pressure to capture misconduct, particularly at the institutional level, in the wake of the royal commission.
Treasurer Josh Frydenberg made a point of noting the failings of ASIC in capturing and punishing misconduct in the years preceding the royal commission.
“This interim report also makes clear that while behaviour was poor, misconduct when it was revealed went unpunished, or the consequences did not meet the seriousness of what has been done,” he said.
For example, earlier this month, the royal commission heard that ASIC allowed a 96 per cent penalty discount to CBA after it misled consumers in its marketing. Further, ASIC allowed CBA to draft a media release on the issue.
Up to now, the federal government has announced that significantly harsher penalties for misconduct – including double the current jail time – is in the works.