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Monday, 25 June 2018
Page: 6197

Mr THISTLETHWAITE (Kingsford Smith) (16:48): Labor will support the Treasury Laws Amendment (APRA Governance) Bill 2018. It provides for the Governor-General to appoint a second deputy chair to the Australian Prudential Regulation Authority. Currently the Governor-General has the discretion to appoint only one full-time APRA member as deputy chair. This bill will provide for the Governor-General to be able to appoint someone who is to be a full-time APRA member as the chair or a deputy chair of APRA. Currently there is provision for only one, and this will rectify that.

APRA is the prudential regulator for the Australian financial services industry. It's an independent Australian government body that oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies and, most importantly, Australia's superannuation industry. APRA is governed by a full-time executive group of at least three and no more than five members.

The terms and conditions of the appointment of members are set out in the APRA Act. Members are appointed by the Governor-General on the nomination of the relevant minister. Currently one member must be appointed chair and another member may be appointed deputy chair. Currently APRA has only three members, yet it's clear that Australia needs a strong, properly structured and well-resourced prudential regulator. The APRA Act highlights the regulator's purpose, which is to balance the objectives of financial safety, efficiency, competition, contestability and competitive neutrality and, in balancing these objectives, to promote the financial system's stability in Australia.

The Productivity Commission's draft report into competition in the Australian financial system found notable failings in competitive behaviour in the home loans market as well as in the small and medium enterprises finance market. The draft report found that competition was less than desirable in other key market sectors, such as lenders, mortgage insurance, add-on insurance and pet insurance. Serving as deputy chair of the House of Representatives Standing Committee on Economics has given me a clear view of some of the attitudes and the practices of those who are working in this industry and particularly, unfortunately, the big banks' attitude to their customers over recent years.

Last month APRA released a scathing report into the Commonwealth Bank's board, its senior management and, indeed, its culture. The report ran to 110 pages and heavily criticised the bank for its widespread complacency, overconfidence, excessive complexity and insularity. The report also explained that CBA had a slow legalistic, reactive and, at times, dismissive culture. We all know too well the self-inflicted problems the banks have caused for themselves over recent decades. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is now uncovering some of that through the evidence given. Some of it is quite shocking. It is not just plain misconduct but potentially criminal actions.

It should never be forgotten that, for 600 days, the Turnbull government opposed the establishment of a royal commission into Australia's banking and financial services sector. It was only after the persistent efforts of the Labor Party in uncovering what exactly was going on in this industry—through numerous inquiries, both in and out of the parliament—that we were able to convince the government, thankfully, to hold a royal commission. The government ignored the pleas of victims; small businesses, particularly some of those businesses in the agricultural sector who have been struggling; and families and, indeed, individuals who have been ripped off by the banks through the banks' conduct. Much of that conduct is predatory lending and bad financial advice that wasn't in the interests of customers. The royal commission has shone a light on some of the worst aspects of the culture, attitudes to risk and decision-making processes in the banks and the financial services industry.

It's clear we need strong and effective regulators, and there will no doubt be some serious recommendations that come out of the royal commission about the adequacy of regulation in the financial services sector in Australia. Labor welcomes both the interim report and the final report, once it's delivered in February. We look forward to some of those suggestions from the royal commissioner in respect of the adequacy of regulation and what can be done to improve confidence and also, ultimately, to ensure that customers have trust in their financial institutions. It has taken the royal commission to help the Turnbull government really see these things a little bit more clearly and to ensure that their mind is focused on better regulation in financial services.

The history has also already really been written when it comes to this issue. Again, the evidence shows that the Turnbull government got another big call wrong in opposing the banking royal commission in Australia. They even shut down calls for action amongst their own backbench, their own members. In particular, they shut down some of those senators in the National Party who were involved in the earlier inquiries into what was going on in financial services regulation in Australia. Those senators began calling for a royal commission five or six years ago, and they were ignored by this government and the Prime Minister. It was only after getting the green light from the actual banks themselves that the government eventually rolled over and agreed to a royal commission. The commission to date has already shown, time and time again, just what happens when you have a light touch when it comes to regulation of financial services in this country.

We all know that the government did everything they could to oppose a best-interest duty and the Future of Financial Advice reforms being introduced by a Labor government when we were in office. And then, when they actually got elected, they went out of their way to try to water down that best-interest duty and, in particular, the catch-all provision that exists at the end of that best-interest-duty test.

In the light of that, we need to make sure about what's been going on in financial services. We need to make sure that we have a properly resourced, strong regulator with the backing-in legislation and indeed the personnel to ensure that they can keep an eye on what's going on in financial services, restore confidence and ensure that people can have trust in the advice that they're getting on their financial affairs. That's why Labor will support this bill. When the dust has settled on the royal commission, our regulators must be well resourced and well governed in order to make sure that the stories of the victims of banks aren't left behind and we can move on with confidence in the banking sector.

Appointing an additional person to an important position like this in our Australian Prudential Regulation Authority will, hopefully, ensure that we never, ever see again some of the practices that we've seen, particularly from the big four banks but also from other financial services providers in recent years, which have been brought to light through the royal commission. Labor supports a stronger regulator to ensure that that never occurs again. That's why we support this bill.