Customers will soon see the back of excessive credit card surcharges, with the Turnbull government announcing on Tuesday morning that it would crack down on merchants and retailers demanding surcharges above what would cost them to process cash-alternative payments.

The legislated ban on card surcharges, to be phased in by next year and enforced by the ACCC, is part of the government’s response to the Financial Services Inquiry, promised during the 2010 elections.

“Businesses are free to charge their customers what they like in a competitive market, but if you go out there and you say, there is a two, three per cent surcharge for using a credit card, I think that carries with it -- we would all agree -- a very clear representation that cannot be disclaimed that the merchant is recovering the cost of you using a card as opposed to paying in cash,” said Prime Minister Malcolm Turnbull.

“Consumers are entitled to a very fair deal to get exactly what they are being represented to be getting – no more than what is going to cost the merchants.”

In addition to improving interchange fees and surcharging arrangements, the Turnbull government has adopted the majority of what it has called “common sense” recommendations by the Inquiry.

Its response makes this financial systems overhaul the most significant since 1997, when the Wallis Report – adopted by the Howard-Costello government – saw the creation of APRA. It includes almost everything, from building better financial system resilience and improving superannuation competition, to crowd-funding equity legislation and cyber security.

Raising banks’ capital reserves

Backing the efforts of the Australian Prudential Regulation Authority (APRA), which has overseen the major banks pool $18 billion in capital raisings this year, Treasurer Scott Morrison emphasised in his announcement the need for banks to increase their capital ratios and protect their lending in line with stricter international standards.

According to the government, banks currently provide close to 90 percent of the domestic credit local firms and households receive.

“Our major banks have also adopted similar business models, with home mortgages accounting for around 60 to 70 per cent of their domestic lending. This creates some concentration of risk in the system,” it noted. “By requiring banks to take greater responsibility for their own resilience, the need for taxpayer-funded bailouts is reduced.”

Although this means banks could raise interest rates -- as Westpac did last week, to much furore -- the treasurer was quick to say that any rate movement decisions by banks will not be imposed by APRA or the government.

However, it is now made implicit that sentiments that some banks are “too big to fail” should be thrown out the door.

Freedom for workers to choose own superfund

Workers who are tied to a superfund by an enterprise bargaining agreement will have the freedom to choose where and how they would like to invest their income, with the PM stressing that people should have the choice to “decide where their super goes”.

To strengthen governance regulations, the objective of the superannuation system (to ensure that retired Australians will not have to rely on welfare pay outs) will be “enshrined” in legislation.

The Productivity Commission will now be tasked to independently develop and release criteria to assess the efficiency and competitiveness of the superannuation system. It will also develop alternative models for a formal competitive process for allocating default fund members to products.

Another super-related legislated change to be rolled out by the end of 2016 include allowing trustees of funds to provide pre-selected retirement income products. The governance of of funds will also be improved: beyond 2016, legislation will be introduced to set out the minimum standards that a third of directors, as well as chairmen, on super boards must be independent.

However, the government has rejected the Inquiry’s recommendation to prohibit limited recourse borrowing arrangements by super funds – an “odd” move, as pointed out by the AFR, given existing concerns about the housing market bubble, which will only balloon with the entry of super funds into the housing investment market.

Crowdsourcing market legislation

With crowd-sourcing increasingly the go-to means for small businesses and start-ups to raise capital, the government is set to bring legislation to support crowd-sourced equity funding, and crowd-sourced debt financing before parliament by the end of 2015.

This will develop a regulatory framework to facilitate crowd-source equity funding through the 2015-16 Budget.

The government is also working on proposals to give legal effect to the APEC Asia Region Funds Passport initiative of facilitating cross border marketing of managed funds across Australia, Japan, South Korea, New Zealand, Philippines and Thailand.

The Asia Region Funds Passport statement of intent was signed back in 2013. In the long-term the passport could facilitate funds from Asia being marketing in Europe through an Asian/European mutual recognition agreement

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In addition to its resilience, superannuation, innovation and regulatory measures, the Turnbull government is also keen to lift the standards of financial advisers so they have to hold a Degree, undertake a professional year, undergo an exam and ongoing professional development, and subscribe to a code of ethics.

“We will introduce legislation to make the issuers and distributors of financial products accountable for their offerings. This will ensure a stronger customer focus in product design and marketing,” the government report noted.

“The new product design and distribution obligation will be principles-based rather than prescriptive and should be viewed as workable by the industry.”

The Australian Securities and Investments Commission (ASIC) is also set to be given more power in terms of product intervention, with consultations to take place to allow ASIC to modify and remove financial products from the market.

By the end of next year, ASIC could hold the power to ban individuals from managing financial firms and review remuneration arrangements in the mortgage broking industry.

The government’s response comes almost a year after the final Inquiry report, delivered by former Commonwealth Bank chief David Murray AO, was released. It follows from the 1981 Campbell Report, which led to the floating of the Australian dollar and deregulation of the financial sector, and the Wallis Inquiry, which led to streamlined financial services regulation, the creation of APRA and the current form of ASIC.

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