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Wednesday, 28 November 2018
Page: 11897


Mrs MARINO (ForrestChief Government Whip) (17:33): I rise to speak on the government's Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018.

I've spoken before in this chamber about the need for all of us, as banking consumers, to have access to really good-quality services from the banking sector. Our needs are very diverse, and they are diverse for each different person in Australia. We need to have enormous confidence in those who we seek advice from. That's why the government's bill is actually putting consumers first. That's the important part of the bill before the chamber today. Not only is it putting consumers first it is giving a very clear message to financial institutions and individuals that complying with the law is actually not negotiable—it is the law. If the law is breached, the courts will actually have a broader range of penalties to impose. Not only will these act as a significant deterrent; there will be real consequences for the types of behaviour that we've seen at the royal commission. The damage has been extraordinary. It's entirely appropriate that people, companies or groups that have contravened the law are actually punished, and that's what this bill is about. The government is absolutely committed to ensuring that our financial services regulators have the various powers they need to protect consumers and to deter and prosecute corporate and financial sector misconduct.

We saw a number of the comments by Commissioner Hayne in his interim report, and some of them bear repeating here today. The conduct that the Commissioner identified and criticised was described in his report as that of 'taking a customer's money when not entitled to take it'. That was on fee for no service. It also included:

preferring personal financial interest over the customer's interest when obliged to act in the customer's best interests;

misleading or deceiving the customer; and

breaking some specific requirement of the law including, but not limited to, provisions intended to protect the customer …

Then, when I look further into the interim report, one of the things that Commissioner Hayne said was:

Each financial services entity is responsible for its own conduct. It, and it alone, is responsible for every act that is identified in this report as conduct that might constitute misconduct or is conduct that falls short of community standards and expectations. The criticisms that are made of the ways that regulators have responded to this conduct must not be understood as diminishing in any way the culpability of the entities that engaged in the relevant conduct.

They are very strong statements. He went on to say:

Important deterrents to misconduct are, therefore, missing from the banking industry. Competitive pressures are slight.

He said:

The banks have gone to the edge of what is permitted, and too often beyond that limit, in pursuit of profit. And they have gone beyond the limit:

because they can; and

because they profit from the misconduct that is described in this report.

What we see here today is a range of measures to help cover off some of those instances that the interim report of the Commissioner alluded to. The message here is very clear from the government: complying with the law is not negotiable. If the law is breached, the courts will have a broader range of penalties to impose, which will act as a very significant deterrent. The bill more than doubles the maximum imprisonment penalties for some of the most serious white-collar crimes that I have just described and brings Australia's penalties in closer alignment with leading international jurisdictions. It will also increase several penalties for individuals by more than fivefold and increase civil penalties for corporations by more than tenfold. The government is also giving courts the power to consider even greater penalties where the profits from misconduct are high or where the company's annual turnover exceeds $105 million.

As I referred to with the royal commission, the proceeds of misconduct have been shocking and massive. This bill will ensure that courts can act in these situations. At the moment there is no penalty, apart from taking licensing action and perhaps even taking away the licence, should a financial institution breach its licence to provide financial services that are efficient, honest and fair. However, under these new laws, individuals could face a maximum civil penalty of three times the benefit gained or over $1 million; and companies could face a maximum of $10.5 million or three times the benefit gained or 10 per cent of annual turnover capped at $210 million.

In addition to strengthening the penalty framework, the law will be amended to ensure that courts prioritise compensating victims over collecting penalties from offenders. This is important so that customers who have been affected by the decisions of individuals or institutions can be confident that they won't be left out of pocket. We have consulted with the Legislative and Governance Forum for Corporations in relation to the bill, and it has approved the bill as required under the Corporations Agreement 2002.

As I said at the beginning of my speech, people have lost faith, as we have heard in this House previously. That is extremely serious. They are angry and frustrated, and they are unbelievably hurt not only by what has happened to them but by the weight and amount of evidence they've heard at the royal commission. There are a lot of people who are very shocked. They are particularly angry that the people whom they trusted at those institutions did the wrong thing and didn't act in their, the consumer's, best interest. They are angry about the person, often sitting across the desk from them, who has given them advice that they were trusting to be the right advice. Having done that regularly with a bank manager, I can understand how frustrating it is and how angry people are when they get their advice. We need absolute faith in our financial institutions and the advice they give us. People like me and many others in small business rely on that information to make sound commercial decisions. The decisions you make and the decisions you are in a position to make can make or break your business and can have a major impact on your family.

This bill is yet another part of the government's comprehensive, aggressive reform agenda for the financial sector. We've created a framework to hold banking executives accountable for their actions under the government's Banking Executive Accountability Regime. We've boosted banking and financial services competition to benefit consumers. I note also that we announced recently greater backing for small business by lowering the cost of funding for smaller banks and nonbanks with a $2 million fund, which will mean cheaper loans for small and family businesses, something that's critical to small businesses in Australia. We have provided ASIC with an additional $70 million of funding and significant new powers, and appointed an additional deputy chair, Mr Daniel Crennan QC, with a key focus on enforcement action. These reforms have come from our government and our government's determination to ensure that our financial sector is as strong and customer focused as possible.

There are other inquiries that we have conducted into the financial sector which have provided a number of recommendations. A stronger penalty framework is just the next step for us as a government. It's a step not only about holding those accountable for what they've done but also about making sure that customers can have far more confidence in the advice that they get. In making some of the biggest decisions that you make in life—whether you're an individual deciding about a loan that you want for a home or a vehicle or you're a small business; whatever decision you're making—you frequently rely on very sound advice. One of the toughest things for you as a small-business person to accept is that advice you were given was not in your best interests. Okay, we have to look at every deal we're offered and consider it from our own perspective: is this the best deal that I can get? Is this the right deal for what I'm trying to do in my business or in my life? However, you do expect that the quality of the advice that you get across the counter is the best it can be for your particular circumstances. Financial institutions have a long way to go to regain the confidence of consumers, and with the government, through this bill, putting consumers first, I hope people in small businesses start to get much more confidence in the advice they get.

I have spoken previously in this place about some of the issues that small businesses like our own were facing in those early years. When you consider that in those particular years interest rates went from 17 to 23 per cent, our interest and payments were $1,300 a month and we were generating $2,000 a month, every dollar counted. Every decision counted in our business. Every bit of advice that we got mattered as to whether we would sink or swim as a business. Yes, there were times with our dairy farm business when it was quite tough for us to actually earn that $2,000 a month. If we got to February, we didn't earn $2,000 a month, because it was a short month and we were paid on a daily basis for the milk that we were supplying. We were having to build and develop a business at the same time. We relied so strongly on the advice that we got from our local bank manager. Let me tell you how important local bank managers are. You can go and have a chat with them and they often understand not only how your business works but how your industry works, the decisions that you need to make as a business and how important that information and advice is.

I am very pleased to support the legislation. I have no doubt that the measures in this bill will provide significant deterrents. These are the actions required. They are the sorts of deterrents that, unfortunately, are necessary for us to apply, along with a suite of other measures that the government has taken and will continue to take.