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Thursday, 13 September 2018
Page: 60


Mr ROBERT (FaddenAssistant Treasurer) (15:29): Can I say from the outset that the commissioner in the royal commission is doing an excellent job. He is due to present his final report in February, with an interim report at the end of September, and the government looks forward to receiving it. It's important that Australians know that there have been 8,600 public submissions, and they are all being read. Australians are being heard. Can I also make the point that if the commissioner asks the government for more time, we will provide it to him. At this stage the commissioner has not sought more time. The coalition government, though, has not waited until the royal commission to begin reforming the financial sector, and that remains a germane point.

I, like many of Labor's frontbench, came into this place 11 years ago in the 2007 election. From there, a number of scandals broke out due to the GFC, amongst other things. We saw the collapse of Trio Capital, involving 5,000 victims and $176 million; Storm Financial, with 4,000 claims and losses of something like $3 billion; Opes Prime, with 1,200 investors and tens of millions of dollars; MIS failures, and the rest. I was a part of the committee that did the inquiry into the financial services sector and did the bipartisan Ripoll report, which I think, from memory, had 11 recommendations. There was no dissenting report; it was a unity ticket on looking at what was required to fix the financial sector.

Years later, in an op-ed in The Australian on 9 February 2012, the Leader of the Opposition wrote:

Australia has some of the best banks in the world. It is partly because of our excellent regulatory system and prudent management.

He was the financial services minister. On 2 August 2013, just 36 days before the 7 September election and change of government, on 3AW, the then financial services minister and current Leader of the Opposition said:

… our financial system has held us in very good stead in recent years and in part it's a testament to the regulatory or the sound regulatory system we have in place.

The government would change 36 days later. The appalling behaviour we have seen from our banking, super and insurance areas did not start when the government changed 36 days after the Leader of the Opposition made that statement. It had started well before that.

We saw extraordinarily poor behaviour when we did the post-GFC banking inquiry. With Storm Financial, many of their advisers had masked degrees in financial planning. Don't think for a second that the Commonwealth Bank and its Townsville branch were not intimately involved in some of the appalling behaviour we saw from Storm Financial; they were. It was brought to account, as were the major banks that we had in committee at that time.

These behaviours have been appalling, and I join with the shadow Treasurer in acknowledging some of the dreadful things we've seen. But this behaviour didn't start when this government came to power. There has been a history of this perversity at times, much of which we bore out during the post-GFC banking inquiry and much of which is coming out now.

One of the first things this government did upon taking power was to instigate the financial systems inquiry, the Murray inquiry, which released its report in December 2014. The inquiry was done for a range of reasons, one of which was to understand the full extent of the challenges in the financial services industry. The government has been systematically implementing the recommendations of that inquiry. We started with purpose, with intent and with clarity to understand the issues, and we have been working methodically through implementing those recommendations. We set up the ASIC capability review in July 2015. We've been putting consumers first in systematically implementing these reforms for the financial services sector, and the reforms are extensive.

The legislation passed to date includes the Banking Executive Accountability Regime, or BEAR, ensuring that senior executives are accountable for the decisions they make. It is one of the most significant reforms in Australia's financial services history. We established the banking executive regulatory regime to impose higher standards of behaviours on banks and their senior executives and directors. We have strengthened the leadership of the financial systems regulators through enabling ASIC and APRA to have a second deputy chair. John Lonsdale will be appointed to APRA—he's a 30-year Treasury veteran—and Daniel Crennan QC has already started in his role as special prosecutor focusing on enforcement.

We've created a one-stop shop for external dispute resolution with the establishment of the Australian Financial Complaints Authority, which steps up on 1 November, to enable more consumers to access fast and free dispute resolution. We've increased the powers of regulators substantially, especially APRA, in relation to crisis management and non-bank lending to ensure the resilience and ongoing stability of the Australian financial system.

We've capped commissions paid on life insurance products to prevent unnecessary churning and raise the professional, educational and ethical standards of financial advisers. We've introduced a ban on excessive credit card surcharges. We've protected consumers from being granted excessive credit limits and building unsustainable debt across credit cards and simplified how interest is calculated. We've establish a regime requiring administrators of significant financial benchmarks to be licensed. There's better protection now for retail client moneys held by financial institutions in connection with over-the-counter derivatives. We've implemented the Asia Region Funds Passport. And, of course, we've done a bunch of work in crowdsourced equity funding to establish new businesses' access to that.

There's a bunch of legislation currently before the parliament to strengthen protections for whistleblowers; to enhance ASIC's capability to attract and retain staff; to relax the legislative 15 per cent ownership cap; to extend the crowdsourced equity-funding regime further; improve superannuation capability; and to protect individuals' superannuation savings from disproportionately high fees, insurance premiums and exit fees. Further reforms have also been announced for increasing the civil and criminal penalties for financial misconduct. They're the most significant increases to the maximum civil penalties, in some cases, in more than 20 years. For individuals, we're talking about criminal penalties of up to 10 years in jail. For corporations, we're talking about criminal penalties that are the larger of $9.45 million or three times the benefit or 10 per cent annual turnover. These are substantial penalties. We are talking about substantial cops on the beat with substantial powers and a substantial stick.

We've extended the unfair contract terms protections to insurance contracts. We're looking at combating illegal phoenix activity. We're imposing design and distribution obligations to ensure products sold by financial institutions are designed for and marketed to an identified target market to minimise the likelihood of consumers purchasing unsuitable products and we're imposing a product intervention power for ASIC to enable the regulator to intervene where products could pose significant harm. We've increased ASIC's funding by over $70 million to equip it with the resources. That's a lot of work that has been done—that is continually being done. This government was not found flat-footed coming into government; we commenced this work from day one in 2013.

The Prime Minister has stated publicly in this House that we didn't appreciate how much people had suffered as a result of the misconduct in banking, but the answer to addressing some of the issues in the financial sector is not just about strong regulation, although that is extremely important. It's also important to create more competition so people have the choice to go to another bank or another financial service provider if they're not happy with the service. People have choice to go somewhere else, if they're not happy with the price or reputational challenges.

Strong regulation is key. Strong regulators are key. As we are working through banking codes of conduct, strong self-regulation is key. They can't exist in isolation. They must exist as triumvirate together. That's why the coalition government has implemented a number of reforms to increase competition in the sector.

We've introduced open banking, and the broader consumer data right, to drive competition across the banking system. We've removed barriers for cooperatives and mutuals to access capitals to enable them to compete more effectively with larger, well-financed banks. We've provided a framework for an enhanced financial services regulatory sandbox to allow fintechs to test new products and services which enable them to compete. There is now mandatory comprehensive credit reporting to force large financial institutions to share their credit information securely. This includes competition considerations within ASIC's mandate, again, to drive more competition. We've permitted all authorised deposit-taking institutions to use the term 'bank' to improve their ability to compete.

This government has been systematically acting, in response to the financial systems inquiry, to get things done. We look forward to the commissioner's recommendations, and I'm very confident the Australian people trust that we, in government, will fix the problems that we encounter as we encounter them.