In a bid to fight off the rising popularity of calls from Labor for a royal commission on the banking sector, the Turnbull government has restored the funding stripped from the corporate watchdog by Tony Abbott.

While the move will give the Australian Securities and Investments Commission (ASIC) more firepower to prosecute banks and other financial services companies for misconduct, experts have conceded it is “useful” but say it is not a solution to the scandals which have rocked the industry.

Treasurer Scott Morrison announced on Wednesday that ASIC will get a funding boost of $121 million paid for by the banks it regulates and a further $6 million in government payments.

But Labor described the new cash as “hush money” paid by the banks to stave off wider scrutiny.

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“I think the changes are useful but the funding has just been restored to where it was years ago,” said Ian Ramsay, commercial law professor at The University of Melbourne.

Some $61 million of the funding will be used to boost ASIC’s data analytics where the regulator is charged with overseeing massive flows of electronic information.

Another $57 million will be devoted to improving surveillance and enforcement in the financial advice, insurance and responsible lending areas following the series of highly damaging scandals involving Commonwealth Bank, Macquarie and others that have seen bank customers fleeced of their life savings.

Avoiding a royal commission?

Opposition Leader Bill Shorten labelled Wednesday’s announcement a tactic for avoiding its calls for a $53 million royal commission into the banks.

“Why has Mr Turnbull gone to the banks and said, ‘Listen, I have cut $120 million from ASIC, if you give me $120 million then we can try and brush off the calls for the royal commission?’

“We can’t have business-as-usual in the Australian banking and financial services sector. If just funding ASIC was going to stop the problem, then we wouldn’t have the problems we’ve currently got. No, it’s not enough,” Mr Shorten said.

Professor Ramsay said ASIC’s regulatory performance compares “reasonably” with similar organisations in other countries. However he said “one trend we don’t often notice is that ASIC is arguably the most powerful regulator in the world”.

“It is responsible for regulating everything from $300 payday loans to the largest takeovers and capital raisings.”

ASIC, he said, has been given new powers and responsibilities in the reforms, but it remains accountable to Parliament through just one Parliamentary committee. “We need to examine new ways of oversight,” Professor Ramsay said.

ASIC has been criticised in recent years for not being proactive enough to prevent billions in losses to investors in a string of financial crises dating from the global financial crisis to recent months.

The report of a recent Parliamentary inquiry into failed agricultural schemes, entitled, in part “Bitter Harvest”, made reference to “ASIC’s after-the-loss approach to enforcement … waiting for complaints, investigating a minute proportion of them, and prosecuting even fewer”.

The report also quoted a former enforcement adviser at ASIC, who spoke of a regulator that lacked ‘a culture of urgency, pro activity and flexibility’, with its processes driven by ‘a management culture that has a wait and see attitude’.

Stewart Levitt, a partner with law firm Levitt Robinson, who ran a class action for investors following the $3 billion collapse of Storm Financial, said the changes to ASIC would not be effective because they had not been accompanied by fundamental law reform.