Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

The purpose of this bill is to introduce a new regulatory regime for administrators of financial benchmarks. This input includes providing ASIC, the regulator, with new supervisory powers, introducing a licensing regime for financial benchmark administrators and making manipulation of financial benchmarks and offence subject to civil penalties. It is something that labour has been committed to for many, many years—strengthening our regulators and the laws and powers that they have to combat financial benchmark manipulation.

Over recent years, in particular the last decade, it's been an issue of significance in international financial markets. There have been a number of scandals and allegations in recent years around the manipulation of financial benchmarks by financial institutions. The most prominent and widespread of those was the case of the LIBOR, the London Interbank Offer Rate, the reference rate for about $300 billion of loans worldwide, which implicated a number of major international banks.

In Australia, we haven't been immune to this phenomenon, with cases actually going on at the moment. They have been taken by ASIC predominantly against the big four banks in respect of manipulation of the bank bill swap rate. There were actions taken against the NAB and ANZ; those actions have been settled by the parties. Westpac chose to fight the litigation, and the litigation has recently proceeded in the Federal Court, and we're awaiting a decision on that. Now the Commonwealth Bank, CBA, has been dragged into this as well, with allegations of bank bill swap rate manipulation against its traders now being made by ASIC, and no doubt that will potentially lead to further litigation against the CBA into the future.

ASIC's noted that manipulation of the bank bill swap rate is not a victimless act. There are implications for Australian businesses by affecting financial products that they use to manage their financial affairs, and the losses to those victims are potentially in the hundreds of millions of dollars. That's why it's important that the regulations are strong enough to combat and deter these activities and, indeed, that our regulators, most notably ASIC, have the powers to investigate, prosecute and deal with people alleged to have undertaken manipulation of financial derivatives.

Schedule 1 of this bill makes amendments to the Corporations Act to strengthen protections against manipulation of financial benchmarks. Currently, rules against manipulation of financial benchmarks are enforced using existing laws relating to market manipulation, false trading and market rigging. Schedule 1 will make manipulation of financial products used in an Australian context a specific criminal offence and subject to civil penalties. It will also establish a new licensing regime requiring administrators of certain designated financial benchmarks to obtain a new benchmark administrator licence from ASIC.

If you give the regulator these new powers, you must supply it with the resources to police them. It's no secret that this government has been woefully incompetent when it comes to ensuring that ASIC has the necessary powers and resources to do its job and to police such activity in financial markets. This government slashed ASIC's funding by $120 million in the 2014 budget, and of course that resulted in job losses. ASIC admitted as much to inquiries of the House and Senate economics committees—that there were job losses associated with this cut to its funding. Given the problems that we've had in Australia in financial regulation and in financial services, particularly in wealth management and insurance and predominantly around the big four banks, you'd think it would be completely the wrong approach for a government to be cutting the resources of the body that's tasked with policing what's been going on in this area.

When those cuts were made, the Labor Party opposed them strongly. Despite the depth of the cuts and the massive impact that the government took to unwind those cuts, it unfortunately took all of the scandals being uncovered in the banking industry—the scandals uncovered through a number of Senate inquiries, as well as the wealth management scandal at the Commonwealth Bank and the CommInsure scandal, again with the Commonwealth Bank—for all of the big four banks to have to review their wealth management practices and back-pay hundreds of millions of dollars to clients who'd been wronged in the scandals. In recent times, the Commonwealth Bank has been prosecuted by AUSTRAC for potential or alleged breaches of Australia's anti-money-laundering and terrorism financing laws. You need to arm the regulator, the body responsible for making sure that bad decisions aren't made and that people don't lose money in the financial markets in Australia. You need to give them the resources to do that, and those cuts have had an effect. It was only when these issues were highlighted and Labor started calling for a royal commission into banking and financial services that the government backed down and returned some of that money to ASIC, but, in many respects, the damage had been done.

On broader financial management issues, it's well known that Labor has led the way when it comes to ensuring that our laws are up to date with some of the challenges and risks associated with consumer credit, financial market regulation, and ensuring that financial planners and banking industry and insurance industry representatives are operating in the best interests of their customers. It was Labor that introduced reforms such as the National Consumer Credit Protection Act, which introduced the first single standard and nationally consistent regime for consumer credit regulation and oversight in this country.

It should be noted that the government also opposed Labor's future of financial advice reforms when they were initially proposed by the previous Labor government. These, of course, were the reforms that introduced a best interest test for the giving of financial advice by financial planners in Australia. The reforms introduced a licensing regime, ensured that a staged test had to be undertaken by financial planners before they could offer advice and removed a lot of the trailing commissions that had existed in some of these products and how they were sold. These reforms came on the back of scandals like Trio Capital and Storm Financial, where hundreds of Australians lost millions and millions of dollars, their life savings, because of financial scams.

When Labor introduced those reforms, the coalition members, kicking and screaming, said that they were intrusive, that it was overregulation and that they weren't necessary. Then, of course, we got the scandals, we got the rip-offs in the banking sector and we got the calls for a royal commission—which, by the way, came out of a bipartisan committee report from the Senate where members of the National Party initially supported the call for a royal commission into banking and financial services. What did the Abbott and Turnbull governments do? They resisted it. They resisted that call for 600 days. For 600 days, the Prime Minister, Malcolm Turnbull, said there was no need for a royal commission into banking and financial services, despite the evidence from numerous inquiries and committees. I think at one stage there were 21 inquiries into banking and financial services in this country, in a parliamentary sense, in a regulator sense and in an industry sense. They were all uncovering all the problems that existed in wealth management, in insurance and in banking generally, but the government chose to do nothing about it.

Then the CEOs of big four banks got together and wrote a letter to the Prime Minister that said: 'Look, we're getting reputational damage from the calls for a royal commission to look at all these scandals that keep coming up. We'll now agree to a royal commission.' What did the Prime Minister do the next day? He did a massive backflip, and suddenly the coalition were offering a royal commission. The royal commission, thankfully, has begun proceedings this week. We support what's going on there and we eagerly await the outcomes of their interim report in September and their final report later on. Labor listened to the victims, the customers, the clients and, importantly, the workers who work in these industries, about the shortcomings and had been calling for a royal commission for two years.

This bill will also give ASIC the power to compel market participants to make submissions to ensure the continued generation of financial benchmarks during times of financial market stress. This is known as the power of last resort. The ASIC Supervisory Cost Recovery Levy Amendment Bill supports this regime by adding benchmark administrator licences to the list of entities from which ASIC may recover its regulatory costs under the ASIC supervisory cost recovery levy.

The related bill, the Treasury Laws Amendment (2017 Measures No. 5) Bill 2017, also facilitates the Productivity Commission appointing an additional commissioner with extensive experience in dealing with Indigenous policy areas and Indigenous communities to oversee the PC's work in evaluating Indigenous policies and programs.

Labor remains concerned about the definition that this government is adopting of an Indigenous person, which is based on race and descent, rather than on the standard definition based on a three-part definition of descent, identification and acceptance in a community. Labor has argued for some time now and in the Senate multiculturalism report that it is necessary to move away from a race based terminology in legislation and policy. That is something that we hope to see the government adopt. Labor stands with Aboriginal and Torres Strait Islander peoples to recommit to delivering them a greater say in issues affecting their lives. This is a big issue that has been identified in this report coming on the back of that Productivity Commission, and it's something that Labor says is very, very serious. We'll work with Aboriginal communities to adjust, and we call on the government to do a similar thing. Based on those comments, I commend the bill to the House.

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