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

() (): On behalf of the Senate Standing Committees on Economics, I present the following reports together with the minutes of proceedings: Review of the Australian Prudential Regulation AuthorityAnnual Report 2015 (Second report); Review of the Australian Competition and Consumer CommissionAnnual Report 2015 (Second report); Review of the Australian Securities and Investments Commission Annual Report 2015

Reports made parliamentary papers in accordance with standing order 39(e).

by leave—At the public hearing on 14 October this year, APRA explained its regulatory agenda over the course of the year and in particular its activities to improve the resilience of banking institutions. APRA discussed with the committee its measures to strengthen bank capital and bolster the stability of bank funding. In particular, APRA noted the importance of developing a loss absorption framework to reduce the need for taxpayer support in the event of an institution being affected by financial or other economic crisis. APRA has continued to prioritise the supervision of lending standards of all authorised deposit-taking institutions, which appears to have improved lending standards in the industry. The committee will continue to monitor APRA's progress to embed these raised standards into industry practice.

Executive accountability and risk culture within APRA regulated institutions was a major discussion topic at the hearing. The committee and APRA share the view that having a sound culture within regulated institutions in relation to risk management is important in order to both maintain the viability of institutions and to ensure fair outcomes for customers and investors. The committee notes APRA's recent report on industry practice in risk culture and continues to focus on this area. On behalf of the committee, I would like to thank the chairman of APRA, Mr Wayne Byres, and his colleagues for appearing at the public hearing on 14 October 2016. I commend the report to the House.

I now turn to the committee's review of the Australian Competition and Consumer Commission annual report 2015. At the public hearing, also held on 14 October, the ACCC outlined its principle responsibilities under the Competition and Consumer Act 2010 as a competition and consumer regulator. The committee scrutinised the performance of the ACCC and examined its roles, recent activities and priorities for the coming year. The committee was particularly interested in hearing about the ACCC's existing powers, the impact of proposed changes to competition law and the more general topic of competition in the banking sector. The committee heard that financial services is the one area where the ACCC is not the principal consumer regulator. The ACCC stated that its focus in the financial sector is on mergers and cartels as well as on any activity that causes a significant lessening of competition.

The ACCC advised the committee that it had relatively recently initiated a program of conducting market studies into particular sectors of the economy and that this is consistent with the practices of other competition regulators internationally. The committee noted the ACCC's work in this area. However, it was concerned that the ACCC had not initiated a market study into the banking sector given that the ACCC has expressed concern in the past that competition in banking is less than robust.

The ACCC also pointed to a number of sectors which are of concern including telecommunications, the operators of various Australian ports and market concentration in the supermarket sector. The committee noted the ACCC's views on the potential impacts of introducing an effects test into section 46 of the act, as suggested by the Harper review. The ACCC reiterated its position that the existing provisions are poorly crafted and that an effects test will support more competition and innovation in various markets including in the financial sector.

On behalf of the committee, I would like to thank the chairman of the ACCC, Mr Rod Sims, and his colleagues for appearing at the public hearing. The ACCC plays a vital role in seeking to ensure Australia's markets function fairly for both businesses and consumers, and the committee will continue to provide oversight of this function into the future. I commend the report to the House.

I now turn to the committee's review of the Australian Securities and Investments Commission annual report 2015. Also on 14 October the committee held its first public hearing with ASIC, to examine its role in corporate, market and financial services and consumer credit regulation, recent surveillance activities and enforcement activities and ASIC's priorities for the upcoming year. Of particular interest to the committee were ASIC's investigations into the life insurance and financial advice sectors. ASIC outlined to the committee its primary role under the Australian Securities and Investments Commission Act 2001, the Corporations Act and a range of other pieces of enabling legislation. This role includes promoting confidence by investors and consumers in the financial system, maintaining and improving the performance of the financial system and facilitating efficient registration of financial services providers.

The committee was concerned by evidence of practices of denying claims in the life insurance sector and sought an update from ASIC on its investigations following the release of its report Life insurance claims: an industry review in October this year. The committee heard that, in many cases, claims were denied on technical or narrow contractual grounds that did not meet a policyholder's reasonable expectations about their coverage when they took out a life insurance policy. The committee notes that, as a result of this review, ASIC has proposed a number of key areas for action to improve claims-handling outcomes for consumers. The committee expects that insurers will work closely with ASIC and the government to implement these recommendations without delay.

The committee also sought evidence on ASICs investigation into the financial advice sector, following a number of cases where consumers were adversely affected by unscrupulous financial advisers. Many of these advisers were employed by the major banks, either directly or through subsidiaries. The committee heard that these investigations are complex and ongoing and looks forward to further reports from ASIC on its surveillance and enforcement activities across the sector.

On behalf of the committee, I would like to thank the chairman of ASIC, Mr Greg Medcraft, and his colleagues for appearing at the public hearing. ASIC has, of course, an important role to play as Australia's corporate watchdog, protecting consumers, investors and creditors. The committee will continue to provide oversight of ASIC into the future. I commend the report to the House.

Debate adjourned.