Madeleine King (Brand, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Review of the four major banks (third report) conducted by the House Standing Committee on Economics. I was a member of this committee and participated in two of these reviews. I'd like to thank my colleagues the member for Kingsford Smith and the member for Burt and those members opposite who were part of the committee, and also the secretariat for all of their efforts in conducting not only this review but all the work that the House Standing Committee on Economics undertakes.

I also participated in briefings with the Reserve Bank Governor, Dr Philip Lowe, and in hearings with Dr Lowe and his very able team: Dr Guy Debelle, Deputy Governor; Dr Luci Ellis, Assistant Governor (Economics); and Ms Michelle Bullock, Assistant Governor (Financial System); among others. The Reserve Bank is a very important institution providing central bank services, and is a touchstone of the Australian economy. The RBA performs this work ably and professionally, and I thank the Reserve Bank and all of their staff for all of their efforts.

As a member of the economics committee, I also had the entirely unedifying experience of witnessing government members attack industry super funds in public hearings with the Australian Prudential Regulation Authority and ASIC. It was staggering to see the government attack those superannuation funds, which have been the best-performing super funds in the country over decades. Industry super funds are respected, trusted and embraced by their members because of their exceptional and consistent performance. They deliver lower administration fees and higher returns, as well as delivering the best value for money for Australian workers and their hard-earned money, which will support them in their retirement. This is what the government wants to attack. By virtue of my former employment for over a decade at a university, I'm a member of an industry super fund—UniSuper. Like most members of industry super funds, I'm very happy. Returns are good and management is excellent. This is what the government wants to attack.

With regards to the review of the four major banks, it was remarkable to witness this government dig their heels in, oppose the royal commission and get down to the business of protecting their powerful friends in the banks. This government, ridiculously, said that this review would sufficiently address any and all concerns held by victims of malpractice in the banking sector and lead to a more open and transparent culture in what has fast become one of the most scandal-ridden industries in Australia. As a member of the standing committee reviewing the four major banks, and after participating in the second and third hearings of these reviews, it was clear this was not happening, and it just highlighted the farcical nature of the whole process.

This is reflected in the dissenting report from Labor members of the committee—the member for Kingsford Smith, the member for Burt and me—that shows just how much we disagreed with the whole thing from the outset, and just how imbalanced the whole process was in the economics committee. It was dominated by government members who are utterly out of touch with the victims of bad behaviour by the banks—they are either out of touch or they are hamstrung by their party. Members had 10 to 20 minutes only to question the most powerful business executives in this country, to assess and to try and work through myriad of issues in what is a complex and highly secretive industry. It was clearly not enough, and this was evident throughout every hearing and every question that was asked.

Finally, Labor has dragged the Prime Minister and the Treasurer to a royal commission. We have consistently called for a royal commission, but it took a letter from the old mates at the banks to bring it on. But even now it seems it won't go far enough, and there are already glaring holes in the submissions process, not least of all the lack of information about how the commission will allow for public submissions, given that everyday Australians are the most affected by this. And I must congratulate the ACTU for setting up a website very quickly to collect individual stories of the victims. This Liberal royal commission already echoes all the fatal weaknesses of the review that has preceded it—padding up the banks and preparing them for a soft landing. Make no mistake: the big four knew that this was coming, and the last 12 months has been an exercise in preparation and anticipation of the day they knew would come. I even asked each executive during the hearing if, in fact, they knew a royal commission was inevitable. I was given a mix of responses, including one from Mr Ian Narev, formerly of CBA, who said:

If there were to be any other forums—in parliament, royal commissions or whatever they might be—we would be prepared to come and do what we do here, which is talk about what we're doing and talk about what we can do better.

There's a lot they can do better. I received a similar response from Ms Catherine Livingstone, the Chair of the CBA, when asking about preparations in the boardroom. She said:

I think the conversation around the board is on the extent of the regulatory environment and also the intersection with community expectations …

Communication expectations? I bet the community didn't expect the CBA to facilitate money laundering by criminal gangs right around this country.

The letter produced to the Prime Minister only a few months later from the big four banks only confirmed my suspicions and, frankly, the very obvious fact that these banks have been preparing for a royal commission for some time. They had got their ducks in a row, preparing the terms of reference. All these circumstances serve to undermine a royal commission before it has even started.

These banks need a royal commission to re-establish accountability and public confidence. That much is true and that much they admit. The most profitable industry in Australia is also the most scandalous with the largest of these corporate scandals currently playing out in the Australian courtrooms with the CBA under money laundering allegations from AUSTRAC to the tune of some $600 million. Other allegations include: failure to report transactions of $10,000 or more on some 53,000 occasions in three years; failure to calculate interest on offset accounts for home loans; 8,600 customers receiving poor financial advice over nine years; allegations of unpaid super to part-time employees; inadequate systems and controls for inappropriate conduct as identified by ASIC; ongoing fees when not providing a service to customers; misappropriation of funds from clients; and exorbitant ATM fees. These are just some of the allegations engulfing the sector as set out in the Labor report. I could go on and on.

In the first two reports, Labor members made one recommendation only, that the government:

… take responsibility, stop defending the banks and establish the systematic, thorough and transparent investigation that only a Royal Commission can provide.

Unlike the recommendations made by the government members on the committee, which have largely been ignored, Labor's single recommendation, a royal commission, has been adopted by the government. This is clearly a vote of confidence in the Labor opposition, and I thank the government for its support. Sadly, yet surprisingly, it is a half-hearted, insipid and lacklustre attempt at holding this bank industry to account. As it stands, it is unlikely to restore public confidence in institutions which are at the centre of the Australian economy and which should have treated Australians with greater respect than they have.

In the third report on the banks review by Labor members, we've recommended to the government that, if this royal commission is to go ahead, it must appoint more commissioners to deal with the royal commission's workload and extend the terms of reference of the royal commission to include the matters that Labor has been calling for. These include: looking at the culture of the banks and executive remuneration; consultation with banking victims groups; protection for whistleblowers; regulation or oversight and the overall regulatory architecture of the banking system; and the conduct of liquidators where this relates to the financial services sector Finally, Labor recommends removing the term:

And, the Commission may choose not to inquire into certain matters otherwise within the scope of this Inquiry, but any such decision will be the Commission’s, alone.

That's the get-out-of-jail-free card for the banks. Then and only then is it possible that this royal commission can retain some semblance of propriety, due process and validity to combat the rising tide of malpractice and malfeasance of the four major banks in this country.

Once again, I'd like to thank the secretariat of the House Standing Committee on Economics for the extraordinary work they do and for the preparation they do to help all members of the committee in preparing for all the reviews that we do. And thank you very much for the support of members who were on the committee with me. I thank the House.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I'm pleased to rise and to have the opportunity to speak on our—the House Standing Committee on Economics—ongoing inquiry into the banks.

One thing I'd like to comment on about the royal commission that's been called is that I have some concern that many members of the Labor Party have given false hope to many people who will try to appear before the royal commission—that they think they can get some compensation. The entire problem, or the vast amount of problems that we've seen in the banking sector, is simply that our legal system does not give the victim of banking malpractice a fair crack. That is the fundamental problem. Someone who is in a business circumstance and who has a dispute with their bank simply does not have true access to justice because of the high legal costs.

That's why the most important thing that the coalition is doing is establishing a tribunal that will level the playing field somewhat. That will give an opportunity to someone who feels or believes that their bank has engaged in unconscionable, or misleading or deceptive conduct, or has broken some contractual term of their arrangement, to take their dispute to a tribunal and to have that dispute heard without undue cost to them. That is what will solve the problem. I'm sure that, when the royal commission finally hands down their report, that will be one of the strong recommendations they'll make.

But, just getting back to some of the last bank inquiry hearings, one of the things I have great concern about is that the banks have engaged in a form of political correctness to try to shadow away many of the things they've been doing. I will go to a couple of examples. Firstly, it's the National Australia Bank and the testimony of their CEO, Mr Thorburn. I asked him a question:

… you put out a press release in 2015 saying that you weren't going to loan any funds to the Carmichael coalmine. At that time, had you been approached for any loans for that project?

Mr Thorburn: I don't think so …

I continued:

… but you put out a press release saying that you wouldn't loan them the funds.

What we had there was the situation where one of the large banks put out a press release that they were not lending money to a certain project when they'd never even been approached. Now, that has to do commercial damage to that project. This is a foreign investor that comes into our country, that has already spent billions of dollars and that is already employing hundreds of Australians in real jobs, and we have one of the big banks issuing a press release saying they are not going to lend to them, which damages their commercial reputation, yet without that investor even approaching that bank. I don't think that conduct is good enough and I don't think it's responsible, given the significant reliance that our nation has on foreign investment. That was the National Australia Bank.

And they continued. Before Christmas, they put out what I can only describe as an 'ecopopulist voodoo statement', where they said they would no longer finance any new thermal coal mining projects. Surely, it's the banks' responsibility to weigh up the commercial viability of someone who approaches them for a loan and to make a decision on that basis? The banks should not be making a decision on what is politically correct at a certain period in time. The banks may well argue, 'There's no extra demand for thermal coal.' But, last year, we saw thermal coal prices up by over one-third. We saw our exports of thermal coal to Japan jump 50 per cent. We saw China's consumption of coal up 5.2 per cent. We've seen the International Energy Agency forecast that the demand for coal will increase between 2016 and 2022 by 300 million tonnes. We only export 200 million tonnes of thermal coal from Australia, and the International Energy Agency says that demand will increase by 300 million tonnes.

Industry experts are talking about the prospects for thermal coal. MineLife's Gavin Wendt said:

There is a very healthy price outlook for thermal coal.

The New Hope Group chief executive said:

We're seeing strong demand for higher quality Australian thermal coal in Asia, and that is what's driving the price.

It goes on and on. There is simply no reason, other than trying to appease a politically correct attitude in this nation, that the National Bank would put out such a statement. This shows, above all, why it is a very good thing to have a royal commission in this nation

And it didn't stop there. In the press release the National Bank put out they went on to say:

An orderly approach to the low carbon transition is critical to ensure Australians can continue to have access to secure, reliable and affordable energy and support our economy.

Hang on—'to continue to have access to affordable energy'? Do any of these bank executives actually open their electricity bills? Do any of these bank executives live in South Australia, where they have the highest electricity prices not only in the nation but in the entire world? They put out a press release saying, 'Continue to have access to affordable energy.' This shows that the executives of the National Bank are clearly out of touch with what is happening in the Australian economy. It shows that they are clearly out of touch with the economic needs of our nation going forward. To put out such a statement defies belief and shows why the decision for a royal commission should be supported.

But it didn't finish there. We also had the same thing from the other banks. We had the ANZ make the decision to put out a press release saying that they wouldn't finance a thermal coal station if it had an emissions intensity of over 800 grams per kilowatt hour. How can a bank make such a decision? Surely it has to weigh it up against the economics and the investment parameters rather than setting these artificial limits? It's the same thing with the Commonwealth Bank. The Commonwealth also put out a statement saying that they, 'wouldn't be loaning any funds and wouldn't consider a loan to the Carmichael coalmine in Queensland'. But, yet again, they had no responses asking them for a loan. How can we have our banks trying to mirror some of this anticoal rhetoric that we see in our community? They're just trying to cover up some of their misdeeds and to create a good feeling about some of their policies.

Our inquiries into the banking sector will continue with a House committee. There are still many issues we need to resolve, but, most importantly, we need to get the tribunal right. We need to ensure that if someone has a dispute with their bank they can take that dispute to a competent tribunal without the risk of being run over by legal costs and time, because that is the current system that we have. When a bank has had a dispute with someone and the person has said, 'I'll take you to the Supreme Court,' the bank would just laugh at them. It is that mismatch of power in our legal system that has caused the problems in our banking sector. I hope that with the policies of this government on our tribunal, and with the input of the royal commission, that this is something we can address so Australian entrepreneurs can go out there, risk their capital and try new business ideas, knowing that if something goes wrong with their bank they have the right to a fair hearing in a dispute.

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

I'd like to thank the member for coal—I mean, the member for Hughes—for being able to make nearly all of his speech about coal while discussing a report from the economics committee's inquiry into banking, and in particular for introducing us to the term 'eco-populist voodoo' economics. That's the quote of the day right there, member for Hughes.

Mr Craig Kelly interjecting—

Coming back to the main point about the banking inquiry, which our committee has been dealing with, the genesis of this inquiry—and we have now handed down our third report—was the work of the banks in managing to increase interest rates on Australian consumers out of cycle with the rates being set by the Reserve Bank. One of the critical things that have come out through the work of the economics committee to date has been the high degree of profitability of our banking sector and how much money our banks are making out of the Australian consumer. While many of us are paying for this, critically it is not all of us. In fact, many parts of Australian society do not benefit in superannuation that may flow from those profits in our banks; some of us have but many people haven't. In the meantime, nearly all members of Australian society are paying for those profits through their use of banking. Of course, in the 21st century, it is almost impossible to maintain an existence in Australian society without paying banks interest rates or fees.

At the same time, the committee has had to grapple with a litany of historical and sometimes current scandals in the banking sector. We have the AUSTRAC scandal with the Commonwealth Bank. We've had the subsequent removal of ATM fees by major banks. It would appear they only did that once one moved. They were quite happy to continue to gouge Australian consumers for as long as possible. We've had the ongoing bank bill swap rate saga, where a number of banks have settled but there was litigation recently commenced by ASIC against the Commonwealth Bank. And of course we now have the government's announcement of the clayton's royal commission into banking.

The Commonwealth Bank, which seems to have been the focus of so much of this scandal, is not alone. Westpac have been accused of having the highest interest rates on their liar loans, which is not surprising after the ABC's Four Corners program found that lending staff were expected to complete between six and nine home loan requests per week. If targets were exceeded, staff could earn bonuses of $6,000 a quarter, but current and former bank staff said that if they didn't meet the lending targets, they were performance-managed out of the bank.

Last year ANZ paid over $43 million of an estimated total of over $52 million in compensation for failing to provide general or personal financial advice to customers whilst charging them ongoing advice fees regardless. ASIC has also banned a number of financial advisers, including from millennium3 Financial Services, after it was discovered it that it was ultimately owned by ANZ Bank. The NAB has also paid $25 million in compensation to victims of dodgy financial advice. A number of NAB advisers have also been banned by ASIC, including former financial planner Patrick Mitchell, who was later sentenced to eight years in jail.

The member for Hughes has referred to the government's proposal, now with legislation going through the parliament, for a financial complaints tribunal, trying to bring together some of the disparate tribunals in this sector. But it is not in any way a panacea to the issues we are seeing in the banking sector, nor is it able to help consumers. At the end of the day, 'tribunal' is a misnomer for this body. It is not in any way going to have independence from the sector. It's paid for by the sector, it's set up by the sector and it doesn't have force of law. It is effectively a contractual body, and that is a fundamental failing in the regulatory regime that we have in Australia.

As the Productivity Commission has very recently pointed out, there are also significant gaps in the regulation of the Australian financial services sector. You can't fix the banks, in particular the culture of the banking sector, without making sure our regulatory regime creates the proper environment. This is particularly important when we realise that the financial service regulator and the financial regulation environment in Australia have been expressly excluded from the terms of reference of the banking royal commission. In that regard, as in so many ways, the government's response to the issues we're finding in the banking sector through the inquiries being conducted by the economics committee and many other bodies is entirely inadequate.

The government has proceeded with the Banking Executive Accountability Regime, the BEAR, which I should point out was actually a Labor recommendation from this committee. However, what the government has put forward is much more teddy bear than grizzly bear, because, unlike the UK scheme which it is based on, the Australian regime only looks at the issue of prudential regulation, having vested administration of this regime with APRA. Of course, all of the scandals I mentioned before and many others have primarily been consumer facing. The consumer regulator, ASIC, is not going to be involved in the BEAR regime at all. If you think about it, the mantra 'profit at any cost' that we've seen from the banks is hardly going to cause a prudential problem, so one really wonders what it is that the government was thinking. Or is this again just a bit of paint over the top to make it look like the government is doing something?

In every report that this committee has handed down, the Labor members of the committee have said to the government: 'We must see the establishment of a banking royal commission.' This has been Labor's position for quite some time. The government has resisted this for years, but, finally, having been instructed by the banks that they would like a royal commission and being provided by the banks with terms of reference that they could live with, the government acceded to the calls that the Australian public have made for so long and announced that it will hold a royal commission. Of course, it has announced a royal commission that has a great deal of breadth in its terms of reference yet manages to exclude things like the regulatory environment, but it has also provided the royal commission with only 12 months in which to do its job of covering all of these matters that need to be investigated. We'll have an interim report handed down in September and a final report in December. The royal commission will cover matters which have seen over a dozen inquiries run in this parliament alone into different aspects of the banking sector over a large number of years and yet, remarkably, the government thinks it can wrap all of this up in a royal commission lasting 12 months. My hope is that as this economics committee continues its inquiry into the banking sector we can look at some of the areas that the royal commission is seemingly excluded from going into, areas such as the regulatory regime.

The other big failure of this royal commission so far, which I hope to see it rectify, is that whilst the banks have said that they will allow their employees to breach their contractual confidentiality requirements in providing evidence, which is only fair, given that the law requires that, there is at the moment no method for confidential submissions to be provided to the royal commission. Confidential submissions are quite different from anonymous submissions. Confidential submissions would allow the royal commission to know who has made the submission and to follow up on the information that has been provided to it. We have a large number of players in the banking sector that are not employees of the banks. In particular, there are a large number of consultants, whether they are the big four banking accounting firms or other specialist advisers to the banks. They have information and have positive ideas about how we can improve the banking sector in Australia, but because of the work that they do there is no way that they can put themselves on the record to the royal commission by name. There needs to be a way for them to be able to provide that inside knowledge, that expertise, to this royal commission so that it can look at how we can improve the banking sector here in Australia.

I suppose one thing at least has been achieved out of the inquiries that have been conducted by the economics committee to date. After I pointed out that the CommBank CEO was paid double that of Westpac's, the new CommBank CEO is starting on a much reduced remuneration package. Maybe that reflects that the banks are starting to listen to what the Australian public are telling them: 'You're doing a bad job; you can't keep ripping us off.'

Debate adjourned.

Sitting suspended from 12:59 to 16 : 02