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

by leave—When it comes to financial services, the main show in town at the moment is, of course, the banking royal commission. We've seen some shocking revelations from that inquiry at the moment into financial services and banks, particularly in the wealth management sector, where we saw numerous cases of victims of predatory lending, alleged fraud, fees for no service and clear breaches of the Future of Financial Advice reforms and section 961B of the Corporations Act. It should never be forgotten that it was this government, the Turnbull government, that opposed that royal commission for 600 days, and Labor ensured that we pushed the government to establish this important inquiry. Labor have been totally vindicated in our calls for a royal commission into banking and finance in this country.

One of the worst offenders at the moment, unfortunately, is the once mighty Commonwealth Bank of Australia. It's got to the situation where there have been special inquiries by our regulators into what's been going on at the Commonwealth Bank. In the recent inquiry that we held with APRA, we discussed that with the representatives from APRA—in particular their inquiry into the Commonwealth Bank's governance, its culture and its accountability frameworks. What APRA determined in respect of what was going on in the Commonwealth Bank can basically be summed up in one sentence: too much focus on profit and not enough focus on culture, accountability and their customers. That's exactly what's been going on in the Commonwealth Bank and, unfortunately, in too many other banks and financial service providers in this country.

It took a Labor government, when we were in office, to actually put in place a best-interests duty in our legislation to ensure that financial advisers actually have to act in the best interests of their customers, because—believe it or not—prior to Labor instilling that legislation in 2012, there was no legal obligation for financial advisers to act in the best interests of their client, and guess what: they didn't. In many cases, they didn't. It was this government and its representatives that opposed Labor putting those Future of Financial Advice reforms in that legislation. So if the government had had its way, when you look at it, the cases in the evidence that's coming out of the royal commission—those shocking cases of what the counsel assisting the royal commission is recommending be prosecuted as criminal conduct—would not have been illegal. They simply would have been a bad look for some of the banks. That should never, ever be forgotten.

So there has been too much focus on profit and not enough on customers, accountability and culture. The Commonwealth Bank has had to enter into enforceable undertakings and a remediation program that's now being overseen by APRA, and APRA have assured our committee that they will continue to monitor what's going on in the Commonwealth Bank. Heap on top of that the AUSTRAC scandal and the alleged clear breaches of Australia's anti-money-laundering and counter-terrorism-financing laws by our biggest bank. The Commonwealth Bank have entered into a settlement with AUSTRAC, and it's a record settlement fine, up to $700 million, that the Commonwealth Bank will pay. When I questioned, in particular, the chairwoman of the Commonwealth Bank and the former CEO when they appeared before our committee on the last occasion, they used this notion of the sub judice rule. They said: 'Oh, we can't answer many of those questions, because these matters are before the court. We can't answer these questions, because these matters are before the court and they may be sub judice.' I made the point at that hearing that I wanted the Commonwealth Bank to answer those questions because it was likely that the matter would be settled and the Australian people would never, ever find out what had actually gone on in the Commonwealth Bank's boardroom and their decision-making processes about the AUSTRAC scandal. Well, what do you know? That's exactly what's happened. The Commonwealth Bank have settled the matter, and the Australian public are none the wiser about what's actually been going on in this bank. So I'm looking forward to representatives of the Commonwealth Bank coming back to our committee in October this year to, hopefully, answer some of those questions.

There was also clear discussion about the macroprudential standards that have been instituted by APRA—in particular the limit on the flow of new interest-only lending to 30 per cent of new residential mortgage lending, following an earlier 10 per cent benchmark. What the banks basically did in meeting that target was to push up the cost of interest-only lending. But they didn't do it only for new loans; they did it for existing loans as well. So existing customers got hit with the increase in the cost of credit on their existing loans, when clearly APRA and the regulator were talking about stemming the flow of new loans. I think most Australians would disagree with the approach of the banks there. Really, that's one of the reasons why a lot of Australians hate the banks—because they do things like this. They give an inch and take a mile when it comes to these macroprudential changes. That's exactly what the banks have done.

There was also a discussion about the competitive nature of those reforms and the fact that they locked in a market share for some of the bigger players compared to the smaller players, and, in many respects, have stifled competition in that market. They are the issues that were discussed. We look forward to our continuing relationship with APRA. I thank the officers of APRA and I thank the officers of our committee for the fine work that they do.

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