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Chairman of the Parliamentary Committee inquiring into the banking industry gives an update of the Committee's work, and explains why he thinks a Royal Commission is unnecessary

JENNY HUTCHISON: Stephen Martin is the Labor Member for Macarthur, New South Wales, and chairman of the parliamentary inquiry into the banking industry that's being conducted by the House of Representatives Standing Committee on Finance and Public Administration. I asked him for an update on the work of the Committee.

STEPHEN MARTIN: Well, as I promised, I think when the inquiry started, it was our intention to try and participate the general public as much as we possibly could in taking submissions on all the very vexed questions that people had concerns about, involving the banking industry in this country. To that end, what we've done is take evidence from the major banks; we've taken evidence from foreign banks; we've taken evidence from building societies and credit unions in umbrella organisations, and as individual bodies. But what we've more recently tried to do, is to just take evidence from individuals who have had some concerns about the banks. And the sorts of matters that have been raised with us are, of course, those that grabbed the headlines some weeks ago, dealing with foreign currency loans, and there seems to be a lot of people that were caught out in that particular way. Whether or not it's a combination of people looking for a cheap loan and then getting their fingers burnt, or the bank walking away from them when things started to go bad, are the sorts of issues that immediately spring up with that particular matter.

We've also had the opportunity to talk to farmers and to small business people who have been concerned about what the banks have described as `revisitation'. Now, it's sort of like `son of banker two' or `return to banker' when you start talking about revisitation, but essentially what that means is that because of the present economic circumstances, many of the banks are now going back to their clients - small business people, farmers, and so on - and just reassessing their overdraft facilities, their credit facilities in the light of present economic circumstances and, unfortunately, the small business person and the farmer believes that that is resulting in higher margins being added to their loans. It means in some cases foreclosure taking place. The bank would argue `Look, there really is no way to save that farm or that small business, and so the best way to just solve everyone's problems is to foreclose, is to close down and sell up and get out', and in some cases that may well be right. But, of course, if you're the small businessperson or the farmer who's had years of tenure on the Eyre Peninsula in South Australia, or in the central west of New South Wales, it's very difficult to just shut up shop and move elsewhere.

What we intend to do, though, over the next few weeks is, of course, take evidence again from umbrella organisations like the National Farmers' Federation. We're going to also interview the third in the series of State bank organisations. Recently, we were in South Australia and in Western Australia taking evidence from the State Bank of South Australia and the RI Bank in Perth, and that provided us with some .. what I think was very good information as to how the State banks fit into the whole financial system.

Now what we want to do, though, is to get some further information from the State Bank of New South Wales, because they would argue that they have been most successful in comparison to some of these other banks, and we'd like to just see why they have been able to keep their head above water and not get themselves into the financial difficulties as has been the case in South Australia and Victoria.

Now later on, in July, the Committee is planning to visit rural communities in New South Wales. Recently, there were a series of articles about the banking practices associated with the Commonwealth Bank in Nyngan, and, additionally, there's been some concern expressed about banking practices in the central west of New South Wales. To that extent, therefore, we're going to travel to Nyngan and Dubbo, and ask people to come and talk to us about what they consider to be the problems. We've also extended an invitation to individual banks to provide their banking staff to the Committee, so that we can question them on the sorts of approaches that they've adopted over time.

Now in the long term, I think what we're going to find is that we're going to have an excellent balance of information provided to the Committee, individual concerns, in some cases whinges about the banks on fees and charges and the cost of maintaining cheque accounts, and overdraft facilities being withdrawn and so on - real whinges, I might say. And on the other hand, we're going to have umbrella organisations and the banks themselves putting forward their views and, of course, we will be giving the banks, the major banks, the opportunity at least twice more to come back before the Committee to answer specific allegations on some of the major issues that have emerged.

JENNY HUTCHISON: The Australian Democrats, in particular, had been agitating for a Royal Commission, but the Government favoured this inquiry by the Representative Standing Committee. Stephen Martin is still convinced that a Royal Commission is unnecessary.

STEPHEN MARTIN: It's my view that when the Committee was established, it was in a time when people were considering turning bank bashing into an art form, but I've gone to great pains over the course of this inquiry to try and bring a balanced view to the whole process. The entire Committee, in fact, is committed to ensuring that we get both sides to any view that is put to us and, of course, we've not come to any conclusions, nor are we even thinking about the sorts of recommendations that we're likely to make when we table our final report.

Now when the Committee was established, certainly the terms of reference, in my view, were wide enough to enable us to investigate almost any aspect of the Australian financial system and, in fact, it seems that the opportunity is being presented to us to do just that. We've drawn in, for example, the non-bank financial institutions; that is, credit unions. We've drawn in the operations of banks that are outside the prudential control of the Reserve Bank of Australia, and we're looking at all those various aspects and submissions have been received on it. And at the same time, of course, there is an Industries Commission inquiry going on into the availability of capital, and in that respect, some of the information which we're gathering has also been put to that inquiry. Now to that extent, therefore, I think it would be simply duplication in establishing a Royal Commission. I don't think the sort of information which a Royal Commission would get, would be any way different to what we are getting or the Industry Commission is getting at this point in time. In fact, the banks have been quite open, quite honest in providing information to us. I mean, I think they have finally seen that this is an opportunity for them to try and clear the air on some misconceptions that may exist about them. But as I've indicated, if there is a need to kick a few bums on the way through because of malpractice or whatever, then we will do so; but conversely, if the opportunity is provided to dispel some myths about the banks, again, we will do that. And I think the people of Australia can expect nothing less, and in that regard, therefore, a Royal Commission .. I know there's been calls made that there should be something like that established, really, in my view, wouldn't achieve anything else, because at the end of the day, a Royal Commission simply tables a report in the Parliament which the Government chooses to either act on, or to let lie and gather dust on the shelves. In the case of a parliamentary committee inquiry, such as our own, the same principle applies. We do a report to the Parliament of Australia, and how the Government chooses to respond to the recommendations that we make in that report is up to the Government. There's no difference and, as I say, I think the information that we're getting from a variety of sources would be no different than a Royal Commission would be able to extract.

What we have at the moment, of course, are 14 Members of the House of Representatives who are prepared to give of their time very freely in this particular inquiry. The parliamentary committee staff of the Finance and Public Administration Committee, consists of five people who are full-time employees who are working as one on this inquiry. All of them are working on it. Additionally, we have a secondee from the Reserve Bank of Australia. We have a secondee being paid for by the Australian Bankers Association. We have a secondee from the Attorney-General's Department with expertise in consumer law and consumer matters and, of course, we also have the opportunity to tap into the Australian Taxation Office, the Attorney-General's Department and any other part of the bureaucracy which we believe would be necessary to get a view on specific aspects of the inquiry.

So, I would simply suggest to people that say that a Royal Commission would have specialist staff and specialist members, that, in fact, this inquiry process is achieving just the same results with probably staff that would do exactly the same job that a Royal Commission would do.

JENNY HUTCHISON: Whilst initially Mr Keating wanted a report from the banking inquiry by the 30 June, Stephen Martin says that's unrealistic. He's now planning on taking some extra evidence in August/September, and on tabling a report before the end of November, so that a Government response can be made public before Christmas.