David Coleman (Banks, Liberal Party) Share this | Hansard source

I rise to speak on the ASIC Supervisory Cost Recovery Levy Bill 2017. I will make some remarks about this specific bill and then some broader issues of relevance. This bill gives effect to an important recommendation of the Murray inquiry back in 2014, and that recommendation was that industry should pay the cost of ASIC's operation and that the level of cost should broadly reflect the usage of ASIC's time. So, an industry which ASIC spends a lot of time regulating would be required to pay more than an industry which ASIC spends a minimal amount of time regulating. As a consequence, a formula has been arrived at. ASIC staff will allocate their time based on activity, as occurs in many professional services firms in the private sector. ASIC will determine the amount of time that is spent on particular activities, and then each industry subsector will be charged an amount based on the cost of regulating it. What that means is that industries with a poor record of conduct, where ASIC spends a lot of time regulating them, will pay more than industries with good conduct. The entities within that specific sector will then be allocated a proportion of the cost, and that cost will broadly reflect the entity's market share. The idea is that an entity which might have a five per cent market share in a particular subindustry would pay five per cent of the cost that is apportioned by ASIC to it for the regulation of that industry. That is entirely fair, because obviously the larger the entity, the more time that ASIC will spend regulating it relative to a smaller entity.

Importantly, the need for ASIC to apportion its time also puts some pressure on ASIC to be transparent about its own internal activities and to publicly account for that time. If ASIC is spending a very large amount of time, for instance, regulating one industry, with minimal practical benefit, then the question would obviously be asked as to why ASIC is spending so much time on that industry. Conversely, if ASIC is spending a lot of time regulating a particular industry and is demonstrating practical outcomes as a result, that would be a sensible outcome and something that would be encouraged.

Similarly, organisations that may have a large number of different licences from government will, through this system, be encouraged to look at those licences and those operations and see if they indeed need all those licences. For instance, if an entity has a licence to operate in a particular subsector, it will be apportioned some of the cost of regulating that subsector and, if that entity turns around and says, 'Actually, our activities here are next to nothing; we don't want to pay that regulatory cost,' perhaps it would hand back its licence if it is not actually acting in that sector. So it will require entities to think carefully when they do in fact seek government licences to operate, particularly in the financial services sector.

This model is quite similar to the APRA model and brings ASIC more in line with the existing APRA model. Importantly, this new regime will be phased in over time. It is effectively an 18-month phase-in process. In June of this year it is expected that ASIC will publish forecast cost data and indicative levies for next year. There is a range of other activities that will happen during the course of 2017, including in October ASIC is expected to publish in its annual report and cost-recovery implementation statement the proposed allocation of resources to address particular strategic risks. And it will continue to publish information over an extended period throughout 2018, with the invoices to individual entities due in January 2019 and payment in February 2019. It is a change to the way that entities contribute to the cost of their regulation, but it is not being rushed and everyone will have ample time to understand its implications.

It is pleasing that this bill has bipartisan support, implementing as it does that important recommendation of the Murray inquiry. But there are very substantial differences in this broad area of corporate supervision and the need to take action now, and there is very, very significant disagreement between the government and the opposition. I want to talk particularly about the activities of ASIC and the regulatory activities as they pertain to banks and the financial services sector. The reality is that an enormous amount is happening in this space at the moment under this government, and absolutely nothing happened under the previous government.

It is important to understand that, when those opposite rail against the financial services sector and call for a royal commission and so on, the Leader of the Opposition was actually the Minister for Financial Services and Superannuation from 2010 to 2013. So, in fact, from October 2010 right up until the election lost in July 2013, the now Leader of the Opposition was the Minister for Financial Services and Superannuation. He was also the Assistant Treasurer for a year between 2010 and 2011. What did the then government do about the regulation of banks during that entire three-year period when the current Leader of the Opposition was the responsible minister? The answer is absolutely nothing. There was no substantive achievement in the regulation of the banking sector at all in that entire three-year period when the Leader of the Opposition, who now rails against the banks and purports to be the friend of the consumer against the banks, was the responsible minister. He did absolutely nothing during those three years. And the only policy that the Leader of the Opposition has in this space now is to have a royal commission. And, of course, that is not a policy; that is simply a call for an inquiry. It is not actually a practical solution to any particular issue; it is basically saying, 'Have another inquiry to make some recommendations in a few years time.' That is a completely inappropriate approach to regulation in this area.

By contrast, this government is taking very firm action in relation to the regulation of the financial services sector. It was very pleasing to see in the budget a range of initiatives in this area. Foremost among them is the creation of the Australian Financial Complaints Authority. This new authority, overseen by ASIC, will be a one-stop shop which will allow consumers to come forward and press their claims against banks. At the moment, there are three different bodies—the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman. This is a really difficult process for people to navigate through. It can be very confusing, very time consuming, and there are three different entities to go to. In the future, there will be one entity which will regulate the banks and have the capacity for binding resolutions of consumer complaints. It was good to see that this was welcomed by the CEO of the Consumer Action Law Centre, Gerard Brody. He said: 'Australians need one high-quality service to resolve their disputes against financial institutions quickly and fairly. The one-stop shop announced today is a sensible move that can help Australians get justice.' That is a very welcome and sensible comment. In contrast, those opposite did nothing between 2010 and 2013, when the now Leader of the Opposition was the responsible minister, and they have made not one constructive contribution to this debate in the ensuing period.

Another important area where the government is taking action concerns executive accountability. One of the things that came out of our recent House Economics Committee inquiry into the banking sector was the complete lack of accountability in the senior ranks of the banks for the various bad examples of consumer treatment we have seen in recent years. The reality is that, until this government took action to announce this executive accountability regime, there was not a regime in place. Those opposite, in three years of government, did not do anything to address the issue of executive accountability in the banking sector. We are taking action on that. There will be fines of up to $200 million for large institutions that do the wrong thing. APRA will have the power to remove and disqualify directors. For the first time, there will be a register of senior executives in the banking sector. That will mean a much greater emphasis on the actions and conduct of senior bank executives. Again, nothing was done by the previous government but this government is taking action in this area.

Another important area concerns competition in the sector. The reality is that, when interest rates rise out of step with the Reserve Bank, our committee's work demonstrated that that is overwhelmingly to the detriment of the consumer. Between 2000 and 2016, there were 20 occasions when interest rates moved out of step with the RBA. On 19 of those occasions, that movement was bad for customers. What that suggests is a lack of strong competition in the banking sector. Again, the architecture that those opposite left when they left government in 2013 was a system where no regulatory body had specific responsibility for regulating systemic competition issues in banking. Frankly, under the previous government, nobody was regulating systemic competition issues in banking.

So what this government has announced is that the ACCC, commencing now, will have ongoing power to investigate competition issues in banking. In particular, in an inquiry that will run through to May of next year, it will look very closely at residential mortgage pricing in the banking sector. That is extremely important. What happens now when interest rates move out of step with the RBA is that people rightly criticise that. People say, 'Why is this bank moving interest rates out of step with the RBA?' In a practical sense, there is no regulatory supervision of that activity. And that changes now, through the ACCC's new team focused on competition issues in banking and specifically interest rates in the mortgage market. Again, those opposite did not do that, and they did absolutely nothing about competition in the banking sector during those long three years of the Rudd-Gillard-Rudd government. When the now Leader of the Opposition was responsible for the financial service sector, he did not take action on any of these issues.

Another concerning issue in the sector that we are taking action on is this issue of the lack of new entrants into the banking sector in Australia. Between 2006 and 2016 the total number of new banking licences for new Australian start-up companies was one. So, we had one new entrant into the banking sector in an entire decade. That basically says that there are a whole range of rules that make it very difficult to start up a bank. There are shareholding restrictions and capital restrictions and a whole range of things that in practice mean it is incredibly hard to get a new bank licence and to get a bank off the ground. That needs to change and, again, the government announced that change in the budget through relaxing the 15 per cent shareholding rule and through having a more two-stage process to enable people to get banking licences and a range of other initiatives.

Again, it is action taken now to improve the sector for consumers and, similarly, the opening up of consumer data so that consumers can go to their bank and say, 'I would like you to share my data with another bank or another financial services provider so that they can offer me a better deal.' The government said in the budget that it will be taking action on this issue, which is a very important long-term structural issue in the banking sector. What we have here, through the ASIC supervisory bill and a range of other initiatives, is the government taking strong action in the banking sector. When the Leader of the Opposition was the minister for financial services for three years, he did absolutely nothing. We are taking action now. The opposition has no policies and no constructive contribution on this. (Time expired)

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