Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise to support the Treasury Laws Amendment (2017 Measures No. 5) Bill 2017 and the ASIC Supervisory Cost Recovery Levy Amendment Bill 2017, as indicated by Senator Cameron. Before I go to those comments, I want to address the comments made by Senator Leyonhjelm, because I could not disagree more strongly with the comments that he's made.

When one looks at the attitude of the major banks to this, particularly on the issue of the bank bill swap rate, ASIC has finally got onto the case and has highlighted the fact that there has been a deliberate rigging of a key benchmark rate which sets so much of what goes on in the financial community. We know that the BBSW is one, which links into home mortgages. It also links in as a reference point and sets rates for most business loans, through to personal lending rates. If the banks are manipulating this particular benchmark rate for their own purposes, then this is a very, very significant matter. It's not a question of Soviet-style control; this is a question of addressing a very real matter of public policy. As Senator Cameron has indicated, this is not a victimless act; this is a bank taking advantage of their market power and their ability to manipulate rates for their own purposes.

We look at the ASIC action in respect of the Commonwealth Bank and we know that there are emails which show communication between the CBA's head of swaps and the CBA Treasury official. The email to the swaps dealer said: 'I think it would be in the bank's interest if you didn't borrow three months' bills on the 15th. We have almost $5 billion setting on that date.' There should have been Chinese walls in place between the different parts of the bank, but those did not exist. It is very clear, in my view, that these are examples of deliberate manipulation.

It's interesting to note that we have just seen reports that mortgage rates are in fact rising without the RBA doing anything about interest rates. We've had the news that Suncorp will lift its owner-occupier mortgage rate by 0.05 percentage points to a standard rate of 5.6 per cent. The article that I'm referring to is by Mr Mata, dated 27 March. It indicates that the size of the lift is not the impressive part of this piece of information; it's the reason for the lift that is important. Mr Carter, the CEO, Banking and Wealth, at Suncorp, said that the decision to hike rates was based on the increasing costs of funding, the costs associated with regulatory change and the US interest rate hikes. So, they've seen higher interest costs for wholesale funding. As I've said, this is not a victimless crime or an abstract matter; this is a matter where our regulators have a legitimate role to step in and stop the sort of manipulation that we're seeing. As a member of the Parliamentary Joint Committee on Corporations and Financial Services and as chair of the Senate Economics References Committee, I've had the opportunity to speak with ASIC on a regular basis and I've seen a lift in the performance of ASIC in recent times. I welcome their activity in pursuing the major banks in respect of this matter, because it seems that all four major banks were engaged in this type of activity.

I can recall the scandal in London a few years ago with the LIBOR—a similar benchmark rate. We saw examples of the manipulation of that particular benchmark rate, and we were told that that type of thing couldn't happen in Australia to the BBSW. However, unfortunately, it has come to pass, or certainly it's been alleged that that is the case. I note that ASIC has been able to settle matters against two of the banks, and I believe that there are ongoing matters that are being pursued. This is not a victimless crime; this is an area where we do need to have proper intervention by the regulators to address these issues. If there's one action by the banks which, to me, justified the royal commission, it is the manipulation of the BBSW. It shows that the culture within the banks is one where they are open to doing this sort of thing. It's quite clear that their culture dictates that, if there is an opportunity to do something, they will take that opportunity, whatever the consequences to others in the Australian community, so I do welcome ASIC's intervention.

It is also to the government's credit that they are looking at increasing the penalties in relation to this matter, so that the manipulation of all financial benchmarks used in Australia will be a specific criminal offence and subject to the penalties that others have talked about. A body corporate will be liable to fines of up to the greater of $9.45 million, which is 45,000 penalty units, or three times any benefit from the manipulation or 10 per cent of the entity's turnover in the previous year. Civil penalties will also apply.

The bills set out a number of the other benchmarks that are to be caught within the regime, and I welcome that. This will give ASIC powers to make rules imposing this regulatory framework, and the framework is based on a set of principles released by the International Organization of Securities Commissions. The Senate economics committee has been looking at this particular issue over a period of time, and it's pleasing to see the government acting on this matter. We commend the bills.