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Monday, 20 August 2018
Page: 7810


Mr THISTLETHWAITE (Kingsford Smith) (19:07): The Treasury Laws Amendment (Financial Sector Regulation) Bill 2018 aims to reduce the barriers to entry to improve competition in the banking and financial system. It includes two schedules. Firstly, it raises the ownership restriction applying to financial sector companies from 15 per cent to 20 per cent in order to support new entrants into the financial services market and create a streamlined path for owners of domestically incorporated companies applying to become a financial sector company. The criteria for approval include an asset threshold of the entity sought to be acquired by fit-and-proper-purpose assessment for the prospective owners. The total resident asset threshold will be $200 million for an ADI or a company registered under section 21 of the Life Insurance Act or will be an amount prescribed by the Treasurer in a legislative instrument. For companies authorised under the Life Insurance Act, the threshold is $50 million or an amount prescribed by the Treasurer under a legislative instrument.

The fit-and-proper-purpose test will replace the current national interest test. It will be set out by APRA as a legislative instrument. Ministerial consent will also be required prior to APRA making a ruling under the FSSA. If an approval is granted under the streamlined path, it will generally remain in place for two years. The second aspect of this bill goes to time-limited authorisation deposit-taking institutions. The bill enables APRA to grant a time-limited ADI licence in order to allow or encourage greater competition in the banking sector and to allow start-ups and banks to make and enter the market at an earlier stage.

The bill clarifies that APRA may impose a time limit on an ADI licence granted to a new applicant. The bill will provide APRA with greater flexibility when considering applications for authority to carry on banking businesses from new entrants to the banking sector. The Australian Prudential Regulation Authority Act highlights the regulator's purpose to balance the objectives of financial safety and efficiency, competition, contestability and competitive neutrality, and, in balancing these objectives, to promote financial system stability in Australia.

The Productivity Commission's report into competition in the Australian financial sector, which was released earlier this month, contained some damning findings on the state of competition in the banking sector. The Treasurer has sat on that report for one month, only releasing it today, without a formal response. Problems like those identified in the report are the very reason that Labor fought so hard for a royal commission. Haven't we seen some shocking evidence that's come out of that royal commission about the practices that have been undertaken by the banks, in particular, the big four and several other financial service providers in Australia? The rip-offs, the scandals, the undermining of customer confidence, the lack of information, the lack of transparency and accountability have been hallmarks of this royal commission, and we certainly await the findings of the royal commissioner into what can be done to improve confidence in this very important industry in Australia.

It should never be forgotten that those opposite vehemently opposed a royal commission in Australia. For 600 days, the Prime Minister and the Treasurer said there was no need for a royal commission, that there was nothing to see and that ASIC and other regulatory bodies had all of the powers of a royal commission to inquire into what was going on in banking and financial services, despite the fact that the government, in its first budget in 2014, cut $140 million from the budget of ASIC. That ensured that some of their employees with particular expertise and skills—skills that had been acquired over many, many years working for the regulator—were lost. It was only when Labor began to shine a light on what was actually going on in financial services and uncover some of the details—like the CommInsure scandal, the wealth management scandals at the Commonwealth Bank and fees for no services that all of the banks have been involved in—that we actually got the government to look at those cuts and partially refund some of the activities of the regulator.

The report that was released in May from APRA was quite scathing of the Commonwealth Bank, its board and its senior management and culture. The report ran into 110 pages, which heavily criticised the bank for 'widespread complacency, overconfidence, excessive complexity and insularity'. The report explained that the 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. The royal commission has uncovered some shocking evidence of just plain misconduct but potentially also criminal actions by many of those working in these institutions.

The royal commission has shone a light on some of the worst aspects of culture, attitude, risk and decision-making in the industry, and it's clear we need strong, effective regulators in this industry. But it's taken the royal commission to help the Turnbull government see this a little bit more clearly, and that's a great shame. It's a great shame because we've all known for many, many years now that there was a problem in this industry. Some of the government's own senators uncovered this, through numerous inquiries that were conducted up to eight or nine years ago into what was going on in the Commonwealth Bank.

Senator Williams is one of those who began the early calls for a royal commission, but he was hosed down by those on his side, particularly the Prime Minister, who we all know comes from a banking background. Senator Williams and others within the National Party are now claiming credit for the royal commission, but where were they when Labor was calling for a royal commission for those 600 days and the Prime Minister was saying no? They didn't raise it as an issue within their party room and take it up with the Prime Minister and actually publicly come out and say this is something that should be done for Australians that were suffering. It took the government too long and they ignored the pleas of the Labor Party on this issue, and many Australians, unfortunately, paid the price with rip-offs and scandals, with loss of income and with the absolute stress and the pain and suffering—in some cases, unfortunately, suicides—that came about as a result of the actions of the banks and the feeling that people weren't being listened to by this government.

The history books have already been written and have shown that this is another call, another big call, that this government got wrong. They even shut down calls amongst their own backbench about this royal commission. Only after the green light from their mates in the financial sector did the Prime Minister finally agree to some form of inquiry in a royal commission. As the royal commission continues to do its good work, we're seeing just what happens when an out-of-touch government prioritises the banks ahead of the financial interests of millions of Australian customers and people who rely on solid, ethical, good advice from financial advisers and banking institutions to make ends meet, to grow successful businesses and to participate within society in accessing credit and other products that are important to everyday life.

This was when the government gutted the core of Labor's Future of Financial Advice reforms as well. That was when the government tried to water down the catch-all provision in the best-interest test that exists in the Future of Financial Advice reforms that are now embedded in the Corporations Act. It was a Labor government, again, that saw and listened to the pleas of people in the wake of collapses like Storm Financial, Trio Capital and Timbercorp, where millions of investors lost thousands of dollars, hard-earned savings, in many cases all of their life's work—and superannuation, in the case of Trio Capital—down the gurgler because of dodgy financial advice. For some, there was no recompense, particularly when the perpetrators of the crimes took off overseas to areas without extradition treaties.

It was because of this that Labor listened and established that big inquiry, which I was privileged to be involved in, looking at what was going on in financial services and making suggestions to the government. That was an inquiry that was chaired by a former member of parliament, Bernie Ripoll. It suggested that the best-interest duty be introduced into legislation in Australia, and Labor did that. We acted and took the advice of that committee and the Australian people.

It was the coalition opposition at the time that opposed that. The now finance minister was on that committee and, believe it or not, he relied on the advice and the evidence of AMP in his dissenting report to argue against the introduction of a best-interest duty into the Corporations Law in Australia. That's right: the now finance minister quoted AMP in his dissenting report, saying, 'These are the reasons why we shouldn't introduce a best-interest duty into Australian law.' Well, we all now know why AMP was keen to insure that there wasn't a best-interest duty introduced into legislation in this country. We all know why: fees for no service, leaving people on legacy products in superannuation and ensuring that they don't transfer to savings products that are more in their best interests. Hopefully, the royal commission will deal with the scandalous behaviour that's come out of AMP. Shame on this finance minister and shame on this government for trying to use the evidence of their mates in organisations like AMP and the big banks to do over Australian customers and hardworking Australians by watering down or taking out that best-interest duty in the Future of Financial Advice legislation that was introduced into the parliament.

Labor acted in government with the FoFA reforms, which were strongly opposed by the opposition—now the government—and by the financial advice industry at the time. It should never be forgotten that the Libs and the National Party opposed FoFA. The very scandalous behaviour being uncovered in the royal commission at the moment would not be illegal if the Turnbull government had their way; it would simply be a bad look for those organisations. Not only did they oppose the original FoFA legislation, but, when they got to office, they set about watering it down. They actually got it through the House of Representatives and the Senate. It was only after Labor introduced a rescission motion and some of the crossbenchers changed their minds because they saw what was going on that we were able to remove that attempt to water down the best-interest duty.

Labor's had to fight to help retain these laws and fight the persistent efforts of members of this government and conservative MPs in this parliament to water down regulation and protections for consumers. If the government had their way, there would be no laws against what some of the big banks and AMP are doing and have done that's being uncovered in the royal commission. That is a great shame because there would be no accountability for these individuals who have perpetrated this pain and suffering for many Australians. There'd be no ultimate accountability for their actions and that would be a great shame.

That sums up this government's approach to the regulation of financial services and leadership. When it comes to taking leadership on this issue, making some tough calls and standing up to the banks and the people who own the wealth in this country and saying, 'No, you're not going to be able to get away with it,' this government fails on every occasion. It was only the previous Labor government and now the Shorten-led opposition that have stood up to the banks and financial houses in this country in introducing FOFA legislation and in calling for a royal commission into the banking and financial services. Because of that, we're now shining a light on some of these practices. We certainly await the recommendations of the commissioner and hopefully being able to act to legislate and restore confidence to this important sector of the economy.