Senate debates

Monday, 19 June 2017

Bills

Major Bank Levy Bill 2017, Treasury Laws Amendment (Major Bank Levy) Bill 2017; Second Reading

6:08 pm

Photo of Nick XenophonNick Xenophon (SA, Nick Xenophon Team) Share this | Hansard source

I say on behalf of my NXT colleagues that we do support the broad principles of the bank levy. One of the main reasons is that this will give a leg-up to those regional banks, those community owned banks, and a chance to compete more fairly and more effectively, because they have been at a competitive disadvantage since the GFC, when the Rudd government—quite appropriately, I believe—put up a package of measures to ensure the safety of the banks. I understand why Wayne Swan as Treasurer and Kevin Rudd as Prime Minister put up those measures to ensure the safety and stability of our major banks. But it did have the side effect, it did have the unintended consequence, of putting the regional banks, the community owned banks, at a competitive disadvantage. That is something that has been apparent over the years. It is something that I have spent a lot of time talking to the smaller banks—the non four major banks—about. This measure will help them. It will mean more active competition in the marketplace, and that is something I unambiguously welcome.

But I also think it is important that the foreign owned banks that have a big presence here in this country, introduced as part of the economic reforms of Paul Keating when he was Treasurer, should also be hit with this levy, because this could raise some $750 million to $800 million over the forward estimates. That in itself could fund a last-resort compensation scheme for the many tens of thousands of victims of financial mismanagement and fraud in this country, particularly those managed investment schemes where there are literally thousands of Australians whose lives have been devastated by them. I note that there are a number of managed investment schemes that are doing okay, but there were some big managed investment schemes that collapsed—Great Southern, Timbercorp and others—and left thousands of Australians devastated financially. I have dealt with these victims, as has my colleague Senator Dastyari. We need to give them some real hope and some tangible help by having a last-resort compensation scheme. Those managed investment schemes which were introduced in the final term of the Howard government were, I think, an accident waiting to happen. Those schemes were so highly leveraged. They were so fraught with difficulty. Because of the very high nature of their leverage, they really were schemes that could easily fall over—and they did, leaving thousands of Australians in very difficult circumstances. That is something we need to look at in the longer term. A levy on the foreign banks would help fund such a last-resort compensation scheme. That would build on the work of the Ramsey review into that.

The levy as currently proposed excludes foreign banks operating in Australia. This has the perverse impact of according a preferred status to foreign banks over Australian banks in the latter's home market. Three of the banks in question are global in size. Some of them have assets or liabilities in the trillions of dollars. They have global size and reach, and they compete in precisely the types of lending that is targeted by the levy—in particular, lending to large companies and institutions, as well as lending in the home loans in the case of HSBC and ING. They are significant lenders.

Evidence given to the committee indicates that what is being proposed in the current bill would apply to domestic borrowings. The evidence from the Commonwealth Bank in their submission is that the levy would apply to domestic borrowings if those were over the threshold of $100 billion. My understanding is that none of the foreign banks operating in this jurisdiction have domestic liabilities that exceed the threshold. But their global liabilities are very, very large and our point is that the levy should be applied to the domestic balance sheet, which is what the Commonwealth Bank has been saying.

Westpac has said, 'Selectively applying the levy places extra burdens on Australians while allowing foreign bank shareholders off the hook for budget repair.' I agree with what Westpac says about that. I should disclose that I bank with the ANZ. For a number of years I have been a happy customer of theirs, but I am sure that small community and regional banks could also provide a terrific service as well. ANZ said that:

… we believe the levy should apply to major foreign banks operating in Australia and exclude the offshore branches of Australian banks. This would be consistent with principles of international taxation, avoid double taxing Australian banks and mean that all major banks in Australia, foreign or domestic, are treated equally. Without the levy applying to major foreign banks, Australian banks will be at a significant disadvantage in the institutional markets where foreign banks mainly compete.

Further, we borrow money in offshore branches to lend to offshore institutional customers. If the levy applies to our foreign branches, it makes us less competitive overseas.

The CEO of ME Bank, one of the smaller, community owned banks, has said: 'What I believe is that we should have a level playing field and then if it can be clearly demonstrated that the foreign banks are getting into the market and there might be a real disadvantage from wherever they are domiciled et cetera then I think the levy should also apply to levelling the playing field, making everyone able to compete fairly.'

There have been some arguments put forward as to why foreign banks should not be included in the levy, and I think it is important to say why I think they are not convincing. One argument is that foreign banks might leave if the levy is extended. Spare me! That is not a credible argument. This argument is far from convincing since these banks face bank-specific levies in a range of their offshore markets—levies that were put in because banks had failed in those markets, markets where they had far larger operations than in Australia. Making the yardstick all banks with a global balance sheet above $100 billion shows that it can be done. It will raise significantly more revenue and mean that the parliament is not actively and unnecessarily discriminating against our domestic industry.

I will be circling an amendment shortly so that foreign banks are captured in the levy. This amendment will ensure that the trigger that hooks in foreign banks will be the global liability of the entity. However, the levy will only be payable on the domestic liabilities of that entity. Therefore, you will get that $750 million to $800 million in revenue over the forward estimates. As my colleague Rebekha Sharkie, the member for Mayo, outlined in the other place in her contribution to the debate, applying the levy to major foreign banks that operate in Australia will also provide the additional funding required to set up that last resort compensation scheme for the victims of financial mismanagement and fraud.

Too many financial services businesses have gone into liquidation and too many financial advisers have gone bankrupt. This has meant there are no means of redress for many thousands of victims. Any compensation scheme should also be complemented with stricter requirements for insurance for financial planners. The government's review into the dispute resolution and complaints framework, better known as the Ramsay review, has been considering exactly such a scheme. And, according to a supplementary issues paper to the review, as of 2 May 2017 an enormous $14.3 million of determinations made by the Financial Ombudsman Service and the Credit and Investments Ombudsman still remain unpaid in favour of complainants. And this figure only accounts for people who have chosen to go through a formal ombudsman complaint process. I have spoken to so many victims of financial malpractice—especially, retired Australians who placed their trust in managed investment schemes. An ongoing compensation scheme should be a priority for any federal government. The cost of such a scheme would be but a small fraction of the total revenue that the foreign bank levy would raise—$800 million over the forward estimates would go a significant way to remedying those cases of treble hardship. I think it would be a fair measure.

So we support this piece of legislation—subject to the issue of the foreign bank levy. We think it is important that the foreign banks are captured by this legislation. We do not think it is unreasonable. I think the argument put by the big banks as to why they should not be put at a competitive disadvantage are actually quite compelling. But I do believe that if we want this levy to be fair and equitable then it needs to capture those foreign banks. With those words, I can indicate that my colleagues and I will be supporting the second reading stage of this bill. We look forward to the committee stage of this bill. My colleagues and I urge the government to urgently consider the whole issue of the levy on the big foreign banks.

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