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Wednesday, 14 November 2018
Page: 8191


Senator WHISH-WILSON (Tasmania) (17:27): I move:

That the ASIC Corporations (Banking Code of Practice) Instrument 2018/700, made under the Corporations Act 2001, be disallowed [F2018L01102].

I put this disallowance up because a most unusual situation has arisen in this chamber. Yesterday when I spoke about the GST reform I talked about Norman Lindsay's 1918 Australian classic, The Magic Pudding. To use another theatrical analogy for today's disallowance we have gone into The Twilight Zone. Normally when this Senate considers whether or not to disallow a regulatory instrument, it matters to us, and is important, because normally the regulatory instrument being considered and examined would make changes to the laws of the land. These changes would matter because these laws would affect the people we represent, but today is different. I really want senators to understand this. Today we have gone into the twilight zone of regulatory instruments. We are considering whether to disallow a regulatory instrument that has no effect in law. To be very clear: this is a regulation that doesn't regulate, this is a law that has no effect in Commonwealth law and this is a code of practice that has no practical effect from a legislative or legal point of view, and that is what makes it problematic.

What is perhaps ironic and indeed bewildering is that the Senate today, with this disallowance, is considering a voluntary code of practice for banking in Australia written by the Australian Banking Association. To give you a little bit of background, the banking industry and the banking sector—the Australian Banking Association is the body that represents the big and the small banks—have had a voluntary code of conduct for many, many years. To provide a bit of context for senators, we have seen—and many of us in this chamber have sat through—numerous inquiries over the last decade into misconduct in the financial services industry in Australia. Many of us have asked questions of the regulators at estimates and at numerous Senate inquiries into the regulation of the banks and the financial services industry.

Eventually, after years of campaigning, we got a royal commission into the banks and the financial services industry. That royal commission is still sitting. While we've had an interim report, we haven't had a final report on the banks in this country. So the first important question we need to ask ourselves is: why is the Senate considering a voluntary code of conduct written by the banks for the banks? Commissioner Hayne has explained why this regulation doesn't matter. In his own words, he says:

Contravention of a provision of the … Code—

The banking code that we're considering—

… may be a breach of contract but otherwise it is not, and will not be, a contravention of law. The Code stands as a set of promises made by the banks enforceable only at the behest of an aggrieved customer. … The code is not subject to—

I repeat: the code is not subject to—

… the Competition and Consumer Act … The code therefore stands in sharp contrast with generally similar industry codes of practice—

We have considered many of them in this chamber. Commissioner Hayne continues:

… Codes dealt with by … the Competition and Consumer Act are called ‘applicable industry codes’ … And a contravention of an applicable industry code engages all the remedial provisions of … the Competition and Consumer Act. Further, if the relevant provision of an applicable industry code is a civil penalty provision, the regulator … may bring civil penalty proceedings … None of this applies—

I repeat: none of this applies—

to the current banking code and none of this will apply to the 2019 Code.

This is the code that the Senate, by default, is about to give its stamp of approval to, if you don't support the Greens' disallowance.

In other words, because the financial sector is not regulated under the Competition and Consumer Act, this code is not enforceable. I say again: this is a voluntary code, and it was written by the banks for the banks. By the way, senators, this is the first time that a voluntary code has been before the Senate. I will explain why in a minute, and why this is actually a critical part of the debate.

Commissioner Hayne has also explained how this code was created:

Although approved by ASIC, it is necessary to recognise that the content of the 2019 Code was also determined by those who are to be bound by its provisions: the banks themselves. It is they who decided how the definition of small business should be framed. It is the banks, therefore, who determined what reach the Code will have.

I'll say it again: the banks have written this code for themselves. It is a code written by banks for banks. It is a voluntary code.

I don't think anybody would disagree, including the banks who have put this new code forward, that their last voluntary code didn't work. It wasn't up to scratch. It wasn't up to standard. It failed the Australian people. It failed the customers of the banks and, ultimately, it failed the banks themselves. So, because the banks have written this code for themselves, by definition it's not particularly useful or helpful to anyone else.

When this version of the code was announced there was much brouhaha about how good it would be for small business, but the Australian Small Business and Family Enterprise Ombudsman, Ms Kate Carnell, has popped that bubble. Ms Carnell recently said that the code 'falls short of addressing the imbalance of power held by the banks' and that it 'will allow the continuation of the aggressive bank tactics revealed by the commission'. Similarly, Commissioner Hayne himself has raised concerns with the code and how it relates to a small business's ability to repay a loan. In fact, Commissioner Hayne has opened questions in his interim report—and I hope all senators have read that—directly regarding this issue. My office has spoken to Ms Carnell about this disallowance and about this voluntary code of conduct. By the banks' own admission, it's already out of date. But, perhaps most tellingly, the Australian Banking Association themselves are not happy with the version of the code that is before the Senate.

So let's synthesise this. The banks come up with a new voluntary code of conduct. Because of the royal commission and the shaming of the banks, they realise their voluntary code of conduct isn't working and they need a new one—one that might actually work. What do they do? They go to ASIC, the Australian Securities and Investments Commission, and they say, 'Can you have a look at this voluntary code of conduct and tell us whether you think it's okay.' After a couple of months, ASIC come out and say, 'Yes, it's okay.' So ASIC have essentially given this their formal stamp of approval. That's why it's being considered before the Senate today, because ASIC have been dragged in by the banks, or maybe easily persuaded by the banks, to review their voluntary code of conduct and give it their stamp of approval. Because ASIC is involved, the Senate and the Australian parliament are involved.

Let me frame it for you again. If this disallowance doesn't get up today and, to use a Trump term, this 'fake' regulation goes into effect, we are essentially giving our stamp of approval, as the Australian parliament, to this voluntary code of conduct. I don't think any senator would think now is the time to be doing that, before the royal commission has even delivered its final report. I'll come back later to what I think the motivations of the banks are for putting this voluntary code of conduct through this process before the royal commission has delivered its report.

Let me just emphasise what I said about Commissioner Hayne's own concerns about this voluntary code of conduct that we have before us. Why is this code of conduct that we're considering today out of date already? It's out of date already because as new revelations became public during the royal commission, including fees for no service and charging dead people, the banks decided they'd better write that into their code of conduct as well. Guess what: the banks have already changed their code of conduct. But it is not in the regulations that are before the Senate today. The regulations before the Senate today passed through a process prior to that, so it's already out of date. By the banks' own admission, the regulation we're looking at today is already out of date. By the banks' own admission, the code of conduct that has been endorsed by ASIC is deficient. The instrument in question refers to the code published in August 2018. Yet on Wednesday, 10 October 2018, last month, the ABA, the Australian Banking Association, announced further amendments to the code to stop banks from charging fees for no service and to ensure refunds to customers. You could be cynical enough to say it was also an important PR exercise to make a public statement that they were again updating their voluntary code of conduct. One does wonder, if the royal commission continued beyond its February date, what other revelations might come to light that might change a voluntary code of conduct which, by the way—I'll say it again—we are tacitly endorsing today if we don't disallow it. Apparently the August version of the code was not sufficiently robust to stop the banks from charging fees for no service, including to dead people. That, I say again, is the code that will go into fake regulation today if we allow it to.

To be clear, the Senate is considering whether to approve ASIC's endorsement of an unenforceable code written by the banks—a voluntary code—when the banks have admitted that the version of the code that has been endorsed by ASIC isn't good enough to stop them charging fees to dead people. That's what you will be allowing today if you don't support the Greens' disallowance of this voluntary code of conduct.

This regulation is useless. It does nothing in light of the revelations of the royal commission. ASIC can't enforce the code of conduct, and it's not covered by the Competition and Consumer Act. Because it does nothing, that makes it dangerous, and I would argue that it also makes it a highly political document. This is a PR exercise for the banks. Why else would the banks be wanting to seek ASIC endorsement? From my understanding—and I stand to be corrected—this is the first time ever that the banks have sought ASIC's endorsement for a voluntary code. I suspect they did it because of the royal commission and the revelations. They wanted to get ASIC's endorsement to give the code more weight. Then, of course, they wanted to get parliament's endorsement and allow it to pass into fake regulation.

We in this place have better things to do than to sign off on window-dressing or potential brand-washing for the banks. I am happy to look at a code of conduct when the royal commission is finished and all these things have been thrashed out and the Australian public get their $60-plus million worth of deliberations by the Hayne royal commission. The royal commission has surprised just about everyone in this country, including many of its critics, and there were harsh critics, not just on the need for a royal commission but whether it would be a complete waste of money. Most of those critics have since swallowed their pride and publicly admitted that some of the revelations they've heard were shocking—much worse than they expected. I understand from speaking to Professor Stiglitz, who is in this building today, that the US is going through a very similar thing with some of the revelations they're hearing about their financial services sector. He said that the 10 years since the global financial crisis, the GFC, have revealed even more deep-seated problems, systemic failures and misconduct within the financial services industry.

Senators, this is a one-off opportunity to get real reform in place within the financial services sector. I'm proud to be part of a party that has written to the royal commission. We made a substantial submission. I want to acknowledge the work of my office and Senator Di Natale's office in preparing that submission to the royal commission. Our submission outlined 18 structural reforms that we believe the commission should consider. By the way, we were invited by the royal commission at this point in time to make submissions on policy. Commissioner Hayne said that he wanted to hear from people on policy suggestions and policy solutions, and the Greens took that opportunity.

This is a one-off opportunity for reform. This is not the time to be giving the banks a chance to window-dress and to do the media. Next week, they're in front of the royal commission. Everyone is speculating that it is going to be a very difficult couple of weeks for the CEOs, the chief executives, going to the royal commission. They can say, with their hands on their hearts: 'We have just had our code of conduct through parliament. We have just had our code of conduct endorsed by ASIC, by the regulator. We've fixed our problems. Through this code of conduct, we've fixed the systemic problems that have led to the misconduct that you've seen in the royal commission.' Yet we know that it's not even covered by our laws and it's out of date already. Do not give them the opportunity to brand-wash, to window-dress, what has been one of the most serious issues that we have managed to achieve, as a House, as a Senate and as a parliament, certainly in this term of government, if not in many terms of government.

This is a one-off opportunity to get some real reforms in the financial services sector to protect customers, to reduce systemic risk and to hold capitalism to account. If you think I'm being a little bit startling in my comments, I will quote the current Prime Minister, Mr Scott Morrison, on the day that the royal commission was announced. Remember when Mr Turnbull, the then Prime Minister, said he would be calling for a royal commission? It was because we forced him to. This parliament forced him to. Mr Scott Morrison came out and said, 'This is not capitalism on trial, unlike what some people in this building would like to believe.' They were the exact words that Mr Scott Morrison used. Well, let me tell you: this has been capitalism on trial.

From the very first week, the commissioner, after his initial deliberation, said to the banks, 'I wants you to go away and consider the proposition, how much profit is too much profit? At what point do you stop putting profit and a culture of profit before people?' In his interim statement, on the opening page, he said that 'greed' had caused the problems that he had seen through this royal commission—greed. Where do you draw the line? It's a very, very important question we have to answer. This is coming from a man that is not a leftie or a socialist trying to overthrow the capitalist system. This is a very well respected commissioner with all the resources the Australian people can give him and his commission at his disposal to get to the bottom of the problems that we've seen in this sector.

This is a critical moment in time for reform—in the next three months. It irks me that this fake regulation gives the banks a chance to say that they've actually achieved something through this royal commission—to get a jump on Commissioner Hayne, to get a jump on this parliament and to get a jump on the Australian people and even potentially their customers. The royal commission and the Ombudsman have raised concerns—and I've gone through that today—and the banks are currently redrafting it, even as it is before parliament and being considered. In the face of this widespread misconduct, the regulators and parliament should be focused on more meaningful reforms. It's the responsibility of the regulators and this parliament, not the banks, to write laws that govern this nation's banks in the public interest. It is better for there to be no regulation than for there to be unenforceable regulation. That's my proposition to you today. The days of the banks writing their own rules should be over, and we can send that message right here, right now, on behalf of the Australian people.