Banks want tweaks, not repeal, to CCCFA and CoFi

Accounting firm KPMG's latest survey of 27 banks reporting between Oc t 1, 2022 and Sept 30, 2023 found that they are uncertain about what the government will do to the Credit Contracts and Consumer Finance Act (CCCFA) and the Conduct of Financial Markets (Conduct of Institutions) Amendment Act (CoFi).

“The main concern is that most banks have either implemented or are well down the path to implementing the required processes and there will be potential costs involved if the existing legislation were to be scrapped,” KPMG said.

“The banking sector's preference was for the government to focus on improving efficiency and removing bureaucratic hurdles within existing legislation to provide a more conducive environment for banking operations while retaining aspects of the current legislation,” it said.

“All of the survey participants acknowledged that the concept of the current legislation was appropriate. Additionally, the banks have emphasised the importance of improving efficiency by providing more guidance and reducing red tape to get businesses moving.”

All the participants agreed about the “crucial need” to protect vulnerable borrowers, but “there was a shared sentiment that the CCCFA has missed these foundational objectives.”

Areas the legislation could be improved included reducing the severity of penalties, providing a “safe harbour” in which institutions could self-report and rectify issues without incurring any further penalty.

Participants also complained about a lack of guidance about “some interpretations.”

Because of the CCCFA's shortcomings, the legislation is believed to be directly contradicting its aim of increasing financial participation.

The survey respondents also complained about the “mixed messages” coming from the government on CoFi.

“This lack of clear direction was something survey participants hoped would be clarified quickly.”

The rising regulatory costs are “a prime hurdle” and institutions were finding a disproportionate impact of the new climate reporting requirements.

The lack of certainty about exactly what is required and whether the disclosures will match or satisfy the regulators is something the sector would like clarified.

“Another matter raised was the volume of this new reporting and whether it was really intended that it run to 50-plus pages.”

The survey found banks' profitability rose just 0.28% in the survey period to $7.21 billion with a 16.9% jump in net interest income offset by a 33% fall in non-interest income, an 8.9% rise in operating costs and a more than three-fold increase in impaired assets expense.