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Thursday, 23 September 1999
Page: 10376


Mr HOCKEY (Financial Services and Regulation) (12:46 PM) —May I take this opportunity to thank the erudite member for Corangamite for his always well-researched and thoughtful speech. I also take this opportunity to note in the House that the member for Corangamite has certainly been one of the most impressive members I have gotten to know in the parliament. He is always very thoughtful about individual issues that are to be dealt with, particularly in relation to financial matters. I not only enjoy our friendship and our thought-provoking discussions but really do appreciate, and have learned from, his never quenchable thirst for more information and for the logic behind individual issues. Perhaps that is why he is one of the leading thinkers in the parliament. I think the people of Corangamite are very well served by his endeavours.

As the member for Corangamite pointed out, the Wallis reforms are indeed the blueprint reforms that are now being used in some of the biggest markets in the world as the path-breaking, path-finding process for global financial services and prudential regulation change.

It is a little disappointing—and I know that he is better than this—that the member for Wills moves this guffaw as an amendment, talking about administration, transparency and consultations involving the levies. The fundamental point is that financial institutions in Australia have never had a better arrangement for prudential supervision. They no longer have half a billion dollars a year tied up in non-callable deposits. Even in the path-breaking reforms of the United Kingdom, which have adopted the Wallis report as the blueprint, there is still a requirement of financial institutions to keep a certain level of deposits with the FSA or an authorised body. It might be the Bank of England. There is still a requirement that they keep a certain level of capital—I think from memory it is about five per cent—with the government.

In our case, we have said to the financial services industry in Australia, `Take back your non-callable deposits and you will pay a maximum per individual operating entity of $1 million for the prudential supervision of APRA and the contribution to ASIC for consumer activities, and also the ATO.' That is a great deal for Australian deposit taking institutions. It is a great deal because on the one hand they have significant benefit from the revocation of non-callable deposits, at some cost to the government, but on the other hand, in the interests of appropriate supervision, it is fair. There is no other major jurisdiction in the world that does not have a similar regime to that of the UK where there is a form of non-callable deposit for a certain amount of assets that need to be lodged with the government.

In our case we have said no, prudential supervision is separate to the requirements of lodging capital with the government. Therefore we have a much fairer system and, indeed, one that is certainly working quite well. I do accept the concerns of international banks and some of the building societies and people involved in the transition of the most recent Wallis reforms from 1 July this year that they may be paying an unfair level of levy. In some cases there are entities that are not paying enough and, on the other hand, there are entities that are paying too much.

I accept that, and that is why I announced a review of APRA levies some weeks ago. That review is being undertaken with a couple of initiatives in mind. The first one is to put in place a fairer system for the application of levies and the second one is to consider the concerns expressed, particularly by international banks about the level of levy that they are required to pay and, in particular, where, for example, one international financial institution might be operating three different arms. It might have a retail bank, it might have an insurance company and it might have an investment bank. Accordingly, depending on its size, it could be paying $3 million in APRA levies compared with far larger financial institutions such as the four major retail banks which operate as one entity with different operating arms and, therefore, pay only a maximum of $1 million. So that is part of the brief of the review, and we will be making some comments about that in the not too distant future.

On that basis, I commend the bill to the House. I reject outright the proposed amendment put forward by the member for Wills. I urge him not to move everything that is put in front of him by his staff or the staff of Senator Conroy. It would be much wiser for him to read amendments before he moves them in this House and consider their ramifications and therefore avoid embarrassing himself and the opposition with what can only be described as `fluff in print'.

Amendment negatived.

Original question resolved in the affirmative.

Bill read a second time.