Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Hansard source

This bill establishes the government's Banking Executive Accountability Regime, or what is now known as the BEAR. This was one of the government's many desperate attempts last year to distract from the urgent need for a royal commission into the banks. When the Treasurer introduced this bill into the House on 19 October 2017 he spoke, as he often did, about his taking-action-now approach to the banks. In media releases, speeches and press conferences, the Treasurer proclaimed how he was 'taking action now' with the banks. Of course, what he really meant by taking action now was avoiding the most crucial action that was needed, and that was a royal commission into the banks.

The government fought Labor's calls for a royal commission for over 600 days. They threw up all sorts of distractions. They ignored the stories of Australians being wronged. They ignored victims. They ignored whistleblowers and they ignored bank staff. Instead, this government offered a confected and piecemeal response to problems in the banks. Then, as we all know, on 30 November last year, in one of the biggest backflips of all, the Prime Minister and the Treasurer begrudgingly capitulated. Labor is pleased that the Prime Minister finally bowed to pressure from Labor on a royal commission. And I note, while I'm at it, the work that was done by the National Party, especially by a senator across the way there who said a banking royal commission was needed. Senator Williams was so important in this approach, and I'm glad, Senator Williams, that you've finally—along with Labor—forced your Prime Minister to do the right thing.

Labor is pleased that this royal commission has been set up. However, it's a shame—even when he was announcing a royal commission the Prime Minister called it 'regrettable'; what an insult to all those victims of the banks who were not even consulted on the terms of reference. This is a Prime Minister who spent more than 600 days fighting Labor's call for a royal commission. They spent 600 days ignoring stories of customers being ripped off, 600 days ignoring small-business owners losing their livelihoods, 600 days ignoring retirees losing their life savings and 600 days ignoring life insurance policyholders being denied justice. They spent 600 days ignoring stories of staff being placed under intense and relentless pressure to push products that customers couldn't afford—a culture that stopped bank staff from looking after customers. It says everything about the Prime Minister's values and priorities that he agreed to Labor's royal commission only when the banks told him he had to. He ignored the plight of ordinary Australians, but when the big banks wrote him a letter he folded on the same day. Even then, we know he doesn't fully believe in a royal commission, saying it was 'regrettable'.

The bill itself will introduce a new accountability framework for the banks and senior bank employees. It will introduce the fair remuneration obligation for senior managers of the banks and a civil penalty regime for breaches of these obligations. Labor will support this bill. That said, there are a number of concerns with the bill. It's a rushed bill. It became clear from the Senate inquiry that the implementation of this bill has been rushed, because the government was desperate to distract from the need for a royal commission when it developed this legislation. It has rushed the implementation. The bill was introduced in October 2017. The government failed to bring it on for debate in the House until February this year. Notwithstanding that, the government originally announced a start date of 1 July 2018.

Throughout the Senate inquiry, stakeholders raised serious concerns about the time frame for implementation. APRA, the regulator, said:

Following passage of the legislation, both APRA and the banking industry will have a great deal of work to do to implement the accountability regime by the scheduled commencement date of 1 July 2018. APRA expects that this timeframe will be challenging; for this reason, the legislation provides some additional transition arrangements in some areas.

The Australian Shareholders' Association said:

While we acknowledge the government’s desire to implement the legislation as soon as possible, we are of the view that ADIs will need time to undertake changes to policies, contracts and systems.

The Australian Institute of Company Directors said:

We reiterate our view that the BEAR’s implementation date should be deferred, so that it commences on 1 January 2019. This will enable all ADIs to prepare their affairs to be in full compliance with the BEAR, and enable APRA to provide the industry with sufficient guidance.

As we also know, the government's own Office of Best Practice Regulation said that consultation on this legislation was 'a significant departure from best practice'. Well, it seems to me, in other areas of responsibility that I have, this is not just simply a departure from best practice; it is the modus operandi of the government. They fail to consult, they fail to understand the issues and they fail to take into account the needs of the Australian people when they are dealing with legislation.

Labor welcome the fact that our amendments in the House to defer the start date for small and medium ADIs by a year have been accepted by the government. You need to tell this government what to do. This is the government that claim they are such great economic managers and yet all of the regulators and all of the banking industry are pointing out how incompetent they are. They are an incompetent government with an incompetent minister and a Prime Minister with a lack of any courage.

These amendments give small and medium banks, credit unions and building societies more time to implement the new requirements. This is consistent with what Labor said should happen when we looked at this bill in a Senate inquiry. A one-year extension for small and medium ADIs to 1 July 2019 was the recommendation made by Labor senators on the economics committee. The government senators on the committee also recommended the delay of one year, but for all banks. Labor moved these amendments in the House because what was especially concerning was the impact of the implementation time frame on the smaller and medium banks. Small and medium banks are essential for ensuring that there is adequate consultation against the big banks. Implementing the BEAR will require a lot of work from the regulators, and the banks will have to implement new reporting structures, policies, contracts, systems, accountability maps, processes and procedures to comply with the new law. While we believe that big banks have the resources to handle this, forcing small and medium banks to scramble to implement the BEAR could have serious and disproportionate impacts on them and take resources away from other projects.

The Customer Owned Banking Association, which represents credit unions, building societies and mutual banks, points out that the banks have:

… vastly greater resources and capacity than their smaller competitors to cope with new regulatory obligations.

The Customer Owned Banking Association has asked for 'sufficient time to plan and prepare for the BEAR'. Strong small and medium banks, mutual banks, credit unions and building societies are very important in making sure there is competition against the big banks. The big banks have the money and resources to implement this policy, but, for these smaller banks, having to rush to implement this could have a negative effect on them and their ability to compete. It would be concerning if this bill, which is supposed to increase accountability for the banks, actually ended up increasing the big banks' competitive advantage.

The Senate inquiry also showed that the big banks had something of a head start. According to the explanatory memorandum, the major banks were involved in talks with the government from around February 2017 about accountability gaps before the BEAR was announced on budget night in May. The Customer Owned Banking Association, which represents credit unions, building societies and mutual banks, told the Senate inquiry that they had no involvement in these discussions and knew nothing about these meetings with the big banks. We think it is only fair that, given the big banks got a head start, smaller and medium banks and mutual banks, credit unions and building societies get the additional time that they need to properly implement this bill. That's why we moved amendments to give small and medium ADIs an additional year to implement the bill, and we are glad that the government has agreed to accept these sensible amendments.

While we are supportive of this legislation, there are other shortcomings with it that came to light in the Senate inquiry. No clear answers were offered to say that the BEAR regime would have had any impact on recent banking scandals if the BEAR legislation had been in place at the time that those events occurred. Representatives from the Consumer Action Law Centre and Choice told the Senate committee that the legislation would do little for consumer outcomes. The Consumer Action Law Centre said:

Treasury has restricted the application of the proposed BEAR so that it will apply to poor conduct or behaviour that is of a systemic and prudential nature. This misses the crucial element of the United Kingdom model that ties accountability measures to poor consumer outcomes, not just prudential matters.

So, basically, what they were saying was that the government was looking after the banks, coming after the banks a little bit, but ignoring customers. Choice called this bill 'a bit of a teddy bear'. The BEAR is focused on prudential matters, and not matters that affect customer outcomes. Despite all the Treasurer's rhetoric, it is unclear how much the BEAR will actually help customers of banks.

This shows once again how inadequate the government's alternatives to a royal commission were. This also ties into issues about the blurring of responsibilities between APRA and ASIC. The Treasurer and the government have very much framed the BEAR as a solution for conduct issues, yet the BEAR is administered by APRA. The actual legislation seems to be focused on prudential matters. ASIC, who would usually deal with bank conduct matters, will not administer the BEAR. That says it all. Indeed, the APRA chairman was asked last year about whether the BEAR would have applied to a number of previous scandals. These scandals included the CommInsure scandal, the NAB's failure to pay 62,000 wealth management customers the amount that they were owed, CBA's poor administration of hardship support, ANZ's OnePath improperly collecting millions of dollars in fees from customers and ANZ improperly collecting fees from 390,000 accounts that have not been properly disclosed. The APRA chairman, Mr Byres, indicated that these kinds of scandals may not be covered by the BEAR because they were conduct issues and not prudential issues of the kind that APRA would have responsibility for. Mr Byres said:

The particular issues that you talked about would be dealt with by ASIC's equivalent, the Financial Conduct Authority, in the UK, not by the APRA equivalent in the UK … Ours is, as initially proposed, a banking regime for prudential matters.

It is not about looking after customers.

What has been shown through separate Senate inquiries and committees is that there is a disjunct between the government's rhetoric on the BEAR and the impact it will actually have. As Labor senators found when looking into this bill, it is concerning:

… that decisions for the BEAR regime to cover prudential matters only and to have APRA be responsible for its enforcement have not been clearly outlined by the Government. Given ASIC requested additional powers to hold managers to account, it seems strange that the BEAR would be developed with little consideration for ASIC's role in managing conduct as well.

To conclude, Labor will support this legislation. However, we note the difference between the government's rhetoric about this bill and the reality of it.

We note concerns that arose in the Senate inquiry that the BEAR won't have any impact on bank conduct as the government has been proclaiming. We note concerns that the BEAR is focused on prudential matters and won't be focused on addressing the conduct issues of the kind that have impacted on too many Australians in recent years. We welcome the fact that the small and medium ADIs will get more time to implement the BEAR, given there was evidence that the rushed implementation schedule could have had serious impacts on these institutions. We welcome the adoption of a Labor recommendation and Labor amendments in the House.

While we support this bill as a measure to make some improvements to accountability of the banks, it remains clear that this bill was no substitute for a royal commission into the banks, and I'll tell you why. It is because the coalition are internally divided on this. Good people, people who want to look after Australians, people who want Australians not to be ripped off, like Senator Williams, have to contend with others in the Liberal Party who, basically, see this as an attack on the free market. So you look after ordinary Australians, and what's been put by some Liberals is that this is an attack on the free market.

The free market should be allowed to rip. The free market will fix itself. And we'll get South Australian Liberal Nicolle Flint, a former policy adviser to the Australian Chamber of Commerce and Industry, saying the bill 'adds yet another layer of regulation to the ever-growing compliance faced by our financial institutions, adds another detractor to our competitiveness'. What does this Liberal member think? That you should be allowed to rip off pensioners? That you should be able to rip off investors to be competitive? That's not the definition of competitiveness that I know. This is an absolute nonsense. We've got all these right-wing Liberals saying the market will fix everything, even if it rips apart families, even if it rips apart communities, even if it leaves some Australians destitute after a lifetime of hard work. That's what these Liberals stand for. That's why a banking royal commission was so essential.

South Australian Liberal Nicolle Flint says that government regulation costs businesses of all sizes time and money. It means they are less productive, less profitable and less able to focus on expansion and innovation. She wants the big banks to get bigger. That's why this government's given big business $65 billion in tax cuts. At the same time, workers who are relying on the banks to give them good advice, who are battling with lower wages—stagnant wages—and who are trying to build a future are being told by these right-wing Liberals that you should let the market rip, that you should let the banks become bigger and that you should not intervene with the banks. That's why Labor said we need a royal commission. It is only Labor that has been arguing to the Liberals and the Nationals this point that we should deliver a fair business system in the banking sector.

I just can't understand that we've got other Liberals arguing this point. Russell Broadbent, Sarah Henderson and Tim Wilson are also criticising support for customers over the big banks. It's an absolute nonsense. (Time expired)