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Wednesday, 22 August 2001
Page: 30006


Mr KELVIN THOMSON (5:57 PM) —I move opposition amendment No. 1:

(1) Schedule 1, item 22, page 20 (line 19), at the end of subclause 25(1), add:

; or

(f) the person is not a fit and proper person.

In moving this amendment I indicate to the House that this amounts to an additional clause 25, on the matter of disqualified persons, which would include or require that a person is a disqualified person if they are not a fit and proper person. The House might remember that Labor moved an amendment to the Financial Sector Legislation Amendment Bill (No. 1) to require that bank directors be fit and proper persons. This was because the bill required superannuation trustees to be fit and proper persons. The government argued for more time so that APRA could draft proper standards. This is being done and there is currently a draft prudential banking standard out for consultation that requires bank directors to be fit and proper persons.

The insurance prudential standards also introduce a fit and proper person test. APRA appears to have decided that the appropriate place for a fit and proper person test is in regulation rather than in legislation. I believe there is a strong argument that it should exist in legislation. I guess the case for regulation is that it allows for greater flexibility for change, but we think that a fit and proper person test should be in legislation, as it is fundamental. We want to make this point to APRA and feel that the House as a whole ought to make this point to APRA.

As I understand it, the government has a problem with this in terms of the subjectivity of the test. Our position would be that, if fit and proper persons tests are subjective tests, why is it the case that we have a fit and proper person test for superannuation trustees in the Financial Sector Legislation Amendment Bill (No. 1). We do not think that we should have inconsistent legislation and regulatory arrangements between different areas of the finance sector on this point. So we feel it is appropriate to have the fit and proper person test set out in legislation.

To assist the minister, I indicate to the House that it seems to me that, in this area of general insurance, the importance of a fit and proper person test is absolute. In debate on this bill and in debate on other bills associated with the collapse of HIH Insurance, I have indicated to the House our concerns with regard to the conduct of particular persons involved in the collapse of HIH. I do not want to recanvas or go over that ground here again, but these concerns are broad. The HIH collapse, involving taxpayers in a $640 million liability over the next five to 10 years and the requirement for an unprecedented royal commission involving, if not the largest corporate collapse in Australian history, certainly the largest insurance company collapse in Australian history, with an estimate of between $2.7 billion and $4 billion in liabilities at present, is a matter of the greatest concern.

In our view, it underscores the need for a fit and proper person test to be included in a legislative sense. We need to make it clear that, if it is good enough to have such a test for superannuation trustees, it is certainly good enough to have such a test for those involved in the running of general insurance companies. One of the things we have to do in this country is restore the reputation of general insurance following the collapse of HIH Insurance. We think that the collapse itself and the government's handling of it have done immense damage to the reputation of general insurance in this country. The regulatory regime that is adopted from here on in is essential for the restoration of public confidence. A fit and proper person test set out in legislation is necessary for the restoration of public confidence.

As I indicated previously, there are areas that we expect the royal commission to examine; for example, the conduct of individuals who have been associated with the running of HIH and also FAI Insurance, which was bought by HIH after June 1998. (Time expired)