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Wednesday, 8 August 2001
Page: 29507

Mr KELVIN THOMSON (10:00 AM) —The Financial Sector (Collection of Data) Bill 2001 transfers the administration of the Financial Corporations Act 1974 from the Reserve Bank to the Australian Prudential Regulation Authority. Various other acts, including the Banking Act 1959, the Insurance Act 1973, the Life Insurance Act 1995 and the Superannuation Supervision Act 1993 are amended to harmonise the collection of financial sector data. Essentially, what this bill is about is harmonising the collection of financial sector data. Currently, the Reserve Bank, the Australian Bureau of Statistics and the Australian Prudential Regulation Authority all have powers to collect data from financial institutions. That information is used by APRA for its prudential responsibilities, it is used by the Reserve Bank of Australia in setting monetary policy and it is used by the Australian Bureau of Statistics for a variety of other functions. This bill seeks to make APRA the primary collector of information from the financial sector. It seeks to harmonise and increase the flexibility of the data collection and publishing regimes, and provides that APRA will be the central repository for the collection of financial data. The intention of this harmonisation of data collection, as you might imagine, is to eliminate duplication of data collection by those three different bodies. According to the explanatory memorandum, the existing data collection framework is fragmented, cumbersome and in some areas outdated. In some cases the data collected is inadequate or no longer relevant to the performance of APRA's functions.

The bill provides for the registration of corporations that are not approved deposit institutions but which provide financial services. Corporations whose principal business is the borrowing and provision of finance, where the provision of finance is over 50 per cent of the business or where the provision of finance amounts to over $25 million, will be registerable corporations which will be required to supply APRA with data. This clause effectively removes a hole in APRA's existing powers in that, while they could approve an application for a banking licence from a conglomerate, they could not seek information from the institution to prudentially monitor its activities. The bill requires that APRA keep a register of such entities and that it make that register publicly available. The bill will give APRA the power to determine reporting standards for, and require provision of, certain documents from financial sector institutions. The determination of reporting standards will be a disallowable instrument.

The bill proposes additional powers for APRA: it may, in writing, exempt a financial sector entity or a class or kind of financial sector entity from the requirement to comply with reporting standards. While the bill proposes that the reporting standards that APRA determines are disallowable instruments, the power to exempt is not a disallowable instrument. This would mean that APRA could exempt entities from reporting standards without any reference to the parliament. That seems inconsistent to us, and Labor is proposing to amend the bill to make this kind of exemption a disallowable instrument. It is my understanding that the government is prepared to support such an amendment.

The bill requires that APRA must try to minimise, as far as practicable, the burden that would be imposed on financial sector entities in complying with the requirements of the standards. I make the observation here that APRA's role is to ensure, as far as it possibly can, that the financial system is safe and secure. In the wake of the collapse of HIH, that is a point that scarcely should need reinforcing. In doing this, it should use whatever resources it needs and should be demanding from financial institutions whatever data it needs. The proposal therefore to minimise the burden of the data collection activities may be seen to be in conflict with the prime role of ensuring that our financial system is safe and secure and that our savings are safe and secure. Given that, Labor believes that section 13(5)(b) is unnecessary, and will therefore be moving an amendment to delete it.

The recent collapse of HIH has raised questions about the competency of APRA and, in particular, the appropriateness of APRA's light touch regulatory regime. We have a situation here where the government is endorsing that light touch regulatory system by requiring that APRA must try to minimise, as far as practicable, the burden that would be imposed on financial sector entities in complying with the requirements of the standards. You have to ask the question: where would the line be drawn on this matter of reducing and minimising the compliance burden in providing information? Labor suggests that it is not appropriate for the government to be continuing what it describes as the `light touch regulatory model'. That light touch regulatory model is already costing taxpayers, over the next 10 years, some $640 million as we bail out the victims of the collapse of HIH. The estimated cost of that HIH assistance package is $640 million. We do not need more of this light touch regulation. We need to ensure that our financial institutions are safe and that our savings are safe—whether they be in banks, superannuation funds or insurance policies. As many of my colleagues will be aware from the case studies involving victims of the HIH collapse, many people believed they had insurance coverage and it turned out that that insurance coverage was not available because of the collapse of HIH. That effectively was enough to destroy their life savings or to send their business broke. It had calamitous impacts on those families and on those businesses. Given that, we do have a concern about the appropriateness of the light touch regulatory regime and propose to move amendments in committee which would, on the one hand make the exemption from the requirement to comply with those reporting standards a disallowable instrument and, on the other hand, make sure that it is clear that APRA's prime role is to ensure that our financial system is safe.

In relation to that matter, I observe that the chief executive of APRA said last week to the Investment and Financial Services Association conference in Brisbane that APRA had done everything that it possibly could in relation to the issue of HIH and that its role would be vindicated by the royal commission when the royal commission ultimately comes to do its work. I am sure that you are aware that it is Labor's view that the royal commission ought to have been going already and we are disappointed that it will not start until September. It does seem to me that APRA has changed its position from its acknowledgment earlier in the year that it could have done more and that it does bear some responsibility for the HIH collapse. I was surprised to read Mr Thompson's remarks suggesting now that APRA is apparently no longer responsible for the HIH collapse. It is certainly a matter that the royal commission will be investigating, and the sooner that royal commission is brought on and does its very important work in restoring public confidence in general insurance, the better.

The other matter I would note in conclusion is that recently the Minister for Financial Services and Regulation, Mr Hockey, addressed a conference in Cairns. Those who were promoting that conference said that the minister is endeavouring to establish a situation where financial sector regulation and things of that nature would be freed up from Senate scrutiny. It struck me as an extraordinary position for the Minister for Financial Services and Regulation to be taking. I do not know whether it was part of his prospective bid to be deputy leader of the Liberal Party but the Senate plays an important role in the Australian political firmament.

As far as I can understand, there is no likelihood of the Constitution being changed in a way that would enable House of Representatives ministers to avoid Senate scrutiny. It is my own view that Senate scrutiny is an important matter in ensuring that not only the financial services minister but also other ministers are held properly accountable for the administration of their portfolios. It has been doing some important and valuable work. Indeed, the Senate Select Committee on Superannuation and Financial Services has been conducting hearings into the collapse of HIH and the collapse of Commercial Nominees and doing other important work to ensure that prudential supervision—the monitoring and the regulation—is in place to try to assure Australians that their savings and investments are as safe as they can reasonably be. That is enough for now but, if the government wishes to discuss any of these matters further in the committee stage, I would be happy to pursue these matters further.

Mr DEPUTY SPEAKER (Mr Nehl)—The member for Wills did indicate that he had an amendment. It would suit the convenience of the committee if he could move it.

Amendment (by Mr Kelvin Thomson) proposed:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House condemns the Government for:

(1) APRA's failure to establish adequate reporting standards for bodies in the financial sector; and

(2) its overall regulatory failure and its mishandling of a response to the collapse of the HIH Insurance Group”.

Mr DEPUTY SPEAKER —Is the amendment seconded?

Mr Sawford —I second the amendment and reserve my right to speak.

Mr DEPUTY SPEAKER —The question now is that the words proposed to be omitted stand part of the question.