Adam Bandt (Melbourne, Australian Greens) Share this | Hansard source

I move:

That this bill be now read a second time.

Last week the Commonwealth Bank reported $1.6 billion in earnings for the September quarter.

This was on the back of $5.7 billion in profit for the last financial year and is in line with the staggering $20 billion in combined profits of the big banks.

And it is important to remember that this occurred in the context of the tail end of the global financial crisis and unprecedented government guarantees and other support for the banks.

So it is reasonable to expect the banks to be required to give something in return for this unprecedented level of government support. And it is reasonable to expect that the banks are subject to real competition and are required to provide consumers with real choice.

And it is reasonable to expect that the banks be properly regulated and supervised so that they cannot take unfair advantage of what is effectively a monopolistic position.

Now the banks, of course, do not want to be subject to proper controls and supervision.

In contrast with most developed countries, they want to charge what they like and rely on consumers’ need for banking services to ensure the profits from unfair fees and charges keep on going.

Not surprisingly then, they are sensitive to criticism of their super profits and current practices and it is a measure perhaps of their understanding of community outrage about their profits that they have resorted to hyperbole and insult to defend the undefendable.

The bank CEOs, for example, have sought to characterise such suggestions as akin to proposals from Hugo Chavez and the former states of Eastern Europe.

But, of course, any honest observer of this debate could see the irony of an oligopoly, backed by a government guarantee, complaining about the state sponsored markets of the former Soviet satellites.

Because in reality what the Greens are proposing in terms of obligations by the banks is no different to what exists in many OECD economies and is far less than what is being discussed in many of the G20 countries, including in the United States.

Already many G20 countries have implemented or are examining levies or new taxes which seek to recover the cost of direct fiscal support to the banks provided during the global financial crisis.

And the International Monetary Fund has recommended that even those countries like Australia, which have not had to bail out the banks, consider a levy or financial stability contribution which could pay for any future government support to the sector. They say this should be considered because no country ‘is immune from the risk of future failures and crises.’

They also say that while in countries like Australia the ‘net fiscal costs may ultimately prove relatively modest, they greatly understate the fiscal exposures experienced during the crisis and the wider costs.’

So, while the debate we are having in Australia currently is about choice, competition and what is reasonable to charge the consumer and may seem like a significant shift to the banks, it is in fact not as far down the road of regulatory and financial reform that we have seen in other G20 countries.

Now it may be that in time Australia will need to move to similar measures. The IMF certainly makes a cogent and well considered argument that on average banks have enjoyed an effective 20 basis point subsidy from the public purse by having the government adopt a ‘too big to fail’ guarantee of their activities and borrowings.

That is, because we as the public offered so much support, the banks have borrowed funds much more cheaply even after the guarantee levy paid here in Australia is taken into account.

And we should look at the IMF recommendations and other inputs into the discussion on the post-GFC global financial architecture when considering future recommendations that might be made on reform to the Australian financial sector.

But for now we have before the parliament and in the debate a number of proposals that could begin a process of properly regulating the banks and ensuring increased consumer competition and choice.

These include two Greens bills—my bill, the Banking Amendment (Delivering Essential Financial Services) Bill 2010, which amongst other things caps ATM and exit fees, and Senator Bob Brown’s bill, currently before the Senate, which would place a 24-month moratorium on rate rises above the RBA cash rate.

We also have the proposal on strengthening the ACCC’s powers on price signalling and a new inquiry into the banks and we await the detail on the government’s proposals, which may include support for non-banking institutions.

Other proposals, such as increasing account mobility with a transferable account number suggested by consumer advocates Choice, have also been flagged.

All of these proposals have merit and deserve consideration. None of these proposals will be able to pass the parliament without the support of some combination of the Greens, other crossbenchers and the government or opposition.

So, over the summer break there will need to be some talking, discussion and negotiation on these proposals.

And can I say to the members of the House that the Greens’ door is open and we are ready to talk.

We want to get action on the banks.

We want to get more consumer choice and competition.

We want to ensure the banks only charge their customers what is fair.

We want to see an end to the practice of accumulating obscene levels of profits on the back of ordinary customers.

The first measure that this bill takes is to regulate ATM fees.

The bill prohibits banks from charging their own customers for ATM transactions, locking in current practice. It also caps the charge for using another bank’s ATMs at a level sufficient to cover the cost to the bank of the transaction.

We do not want to refuse the banks the right to charge these fees altogether—as was incorrectly implied in one newspaper over the weekend; we want to simply limit the charge to the real cost to the bank. In 2007, the Reserve Bank of Australia estimated that the average cost to banks for ATM transactions was 75c—less than 40 per cent of the fee they levy upon consumers; the rest is pure profit for the banks.

The proposed basic transaction account in this bill offers banking customers an easy to understand account that provides essential banking services without any hidden profiteering in the form of exploitative fees.

It is time for action on interest rates and this bill will help take such action.

The bill introduces a requirement that banks offer fixed interest gap mortgages and loans with interest rates fixed at a negotiated percentage above the lender’s cost of funds. The banks’ cost of funds will be calculated according to a formula approved by APRA. These so-called tracker mortgages are very common in many other OECD countries, and here in Australia at least one Queensland credit union already offers such a product.

Finally, the bill limits mortgage and loan exit fees to the actual and reasonable costs of early repayment and obliges lenders to make consumers aware of the existence and amount of these fees upfront.

For too long the banks have been free to do and charge what they like.

For too long we have accepted that deregulation and market forces alone were adequate to ensure that banking customers got a fair deal.

For too long we have assumed that the banks, given a free rein, would do the right thing.

The global financial crisis showed the folly of such thinking. And while Australia was immune from the worst, the average Australian was and still is exposed to large potential liabilities.

It is time then for a new social contract on banking that requires banks to accept more responsibility and behave with more moderation.

The Greens will seek to pursue this bill and other measures in the new year.

We will also positively examine other proposals that come before the parliament.

And over the summer, I ask all members of the House to reflect on the fact that to get anything passed there will need to be discussion and agreement, and that those on the crossbenches will almost certainly be essential to that.

If either the government or the opposition wants to know what is important to the Greens, they could do worse than look at this bill and that introduced by Senator Brown in the other place.

In the meantime, this bill is an important start on reining in the banks.

See this speech in context