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Transcript of doorstop interview: Parliament House, Canberra: 26 November 2019: Westpac; Banking Royal Commission; BEAR; Jamland



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26 November 2019

Doorstop interview, Parliament House, Canberra

Subjects: Westpac; Banking Royal Commission; BEAR; Jamland

JOSH FRYDENBERG:

The Government welcomes the announcement by Westpac of the immediate departure of their CEO and the decision to bring forward the departure of their Chairman. As I said over the weekend, these issues develop a momentum of their own but there needed to be accountability. The alleged breaches that have been levelled at Westpac are very serious, both in terms of the number of those alleged breaches but also the nature of them; 23 million alleged breaches of our anti-money laundering laws. AUSTRAC has said that there was a (inaudible) indifference by senior management, a lack of appropriate oversight by the board and a systemic failure by the bank. As you’re aware, both APRA and ASIC in addition to AUSTRAC, are conducting their own enquiries. APRA is doing that under the Banking Executive Accountability Regime that the Coalition introduced and that took effect in 2018. Together with the BEAR, the Banking Executive Accountability Regime, we’ve also increased both the civil and criminal penalties for misconduct in the financial sector. We’re boosted the resources of our regulators, we’re putting in place a criminal division of the Federal Court and we’re taking action on all seventy-six recommendations of the Royal Commission. This week I will be introducing two pieces of legislation which will implement more of those Royal Commission recommendations.

QUESTION:

Did you put pressure on Westpac that Brian Hartzer had to go?

JOSH FRYDENBERG:

I’ve had conversations with Westpac and those discussions were constructive. I made clear the seriousness of those issues, but also the bank itself and the board itself have been having many meetings, including with its own shareholders. In a conversation this morning with the Chairman, he told me before the public announcement of what was to take place.

QUESTION:

Do you think it’s appropriate that Mr Hartzer is leaving with twelve months pay, some $2.7 million?

JOSH FRYDENBERG:

Issues of remuneration and pay for senior executives of our leading banks are matters for shareholders and of course the board. The board will be facing the shareholders on December 12th.

QUESTION:

Westpac’s statement on the weekend said that they were co-operating with AUSTRAC, yet AUSTRAC came out and levelled those civil charges. Does that suggest that that statement wasn’t entirely true?

JOSH FRYDENBERG:

You’ll have to direct questions of that nature to AUSTRAC. I have spoken to the head of APRA today, Wayne Byers, and I know that he is conducting his own investigations. A question like that needs to be directed to AUSTRAC.

QUESTION:

(inaudible) appropriate for the Government to be saying that the board needed to do anything? What changed your mind?

JOSH FRYDENBERG:

Our message has been consistent and clear. Decisions about who are on boards are matters for shareholders, decisions about who are on senior management teams are decisions for boards. These alleged breaches are of a most serious nature and there needed to be accountability. You heard very strong language from our Prime Minister and myself and from other Ministers about the seriousness of these issues and the need for accountability at the bank. I also want to point out that our financial services sector contributes about 10 per cent of GDP, employs more than 400,000 Australians; it’s a vitally important sector to our economy and we need to continue to ensure that they uphold the highest standards of professionalism. But also, that we have strong financial institutions because it’s our banks that ensure the flow of credit to households for their mortgages and for other borrowings and to businesses as they continue to innovate to expand and grow. So it’s very important that we have a financial services sector that not only upholds the highest standards of professionalism but that continues to prosper and to support the Australian economy.

QUESTION:

Based on the comment you just made and Hartzer saying (inaudible). Are you confident this won’t affect the structural integrity of Westpac and its ability to basically function as one of the big four?

JOSH FRYDENBERG:

I don’t think it will compromise Westpac’s ability to continue to be an important financial service provider in this country. Let’s not forget, its Australia’s oldest bank. Let’s not forget that millions of Australians have transactions with Westpac and rely on them to be holding their savings or be providing them with loans to grow their business. These are going to be pretty difficult days, not just for the board and for the management of Westpac, but no doubt for its thousands of employees across the company. But it will get through it and will continue to play a vitally important role in our economy.

QUESTION:

Treasurer, what would you say to people who are watching the Royal Commission into Banking with optimism, hoping things would change, only to find out that some of this misdeeds are happening all through this year, in fact, as recently as September and there doesn’t appear to have been any change whatsoever?

JOSH FRYDENBERG:

The first thing I would say is these alleged breaches detailed by AUSTRAC go back to 2013. The second thing I would say is the Royal Commission did shine a very bright light on misconduct in many different areas of our financial services sector. And as a result, Commissioner Hayne made seventy-six recommendations and we’ve been moving ahead with implementing those recommendations. I put out earlier this year a very detailed timetable for that implementation, including seeing around 90 per cent of those recommendations either implemented or with legislation before the Parliament by mid next year. Of those seventy-six recommendations, fifty-four were to government, twelve were to the regulators, ten were to industry and I know that our regulators, our industry and the Government are all working to implement them.

QUESTION:

Would you say to those voters ‘just wait and see if changes are implemented’ is that what you’re saying?

JOSH FRYDENBERG:

I would say to those voters and to all the viewers and listeners that the Government believes those alleged breaches against Westpac were the most serious in both nature and number and there needed to be accountability and we’ve seen today the bank remove its CEO immediately and take steps to bring forward the departure of its Chairman. And now, the people of Australia, the customers of Westpac, will be looking to that company to ensure an improved performance going forward.

QUESTION:

Treasurer, the two products that allowed these breaches to take place weren’t specifically designed to get around the system. It’s been around the seventies. Is it time to take a look at all products that try to do that?

JOSH FRYDENBERG:

Issues about the nature of products and their appropriateness are for regulators. As you know, Westpac have taken their action as well as APRA and ASIC are undertaking their own.

QUESTION:

Did Mr Byers tell you that the BEAR could definitely be used in this case?

JOSH FRYDENBERG:

As you know, the BEAR came in from mid ’18 and he says that it does apply to some elements of these issues, but it’s not retrospective so he’s working that through with members of his team.

QUESTION:

Does any investigation also need to take into account Gail Kelly’s tenure at the bank?

JOSH FRYDENBERG:

Again, issues for investigations are matters for our regulators.

QUESTION:

The Business Council today at the Press Club, they are asking for more investment (inaudible) particularly incentives to fast-track mining approvals and their targeted infrastructure funding or our regions are going to fall behind and the economy with it. What is your response to that?

JOSH FRYDENBERG:

Well, the first thing I would say is that a lot of the planning approvals are given at the State level, and at the recent CFFR meeting, which is the Council of Treasurers at both the Federal and State and the Territory levels, we came together to discuss planning approvals and the States are focussed on those. We’re also looking at environmental approvals, particularly for some large projects. And the Prime Minister, in his BCA speech outlined how, as a part of our deregulation agenda, we can move those forward. Because we’ve used the example before but Sir Arvi Parbo, with his nickel mine in the Pilbara in the ‘60s took only eighteen months from the discovery of that resource to its production. Go forward a few decades and Roy Hill and that particular project which saw the creation of more than 5,000 jobs took a number of years before that important project could get up and running. And those delays cost jobs and they cost the Budget and they cost our resources sector in particular.

QUESTION:

Treasurer, are you aware of any other investigations?

JOSH FRYDENBERG:

Look, other investigations are matters for our regulators, but you know, AUSTRAC have put the focus on these companies to ensure that they’re doing the right thing. So, as for that, I would leave that to the regulators.

QUESTION:

Treasurer, one more as well. Are you able to tell us, it’s going back to your time as Environment Minister, when you first became aware of Angus Taylor’s connection to Jam Land?

JOSH FRYDENBERG:

Before he had the meeting, and I’ve said that publically on the record. Thank you.

QUESTION:

Sure. But there’s a question today back on notice from the Department saying they became aware in either December of November 2016. The meeting was in March. You were aware before that. Can you remember what time specifically?

JOSH FRYDENBERG:

I’ve already answered that. But what I can say is this is a mud raking exercise on behalf of the Labor Party and the Greens. Angus Taylor has given a full statement to the Parliament and he’s made it very clear that he was advocating on the behalf of his constituents and he’s not the only one who’s been advocating on this issue. We’ve known the Farmers’ Federation and others have made it very clear their concerns.

Thank you.