Ann Sudmalis (Gilmore, Liberal Party) Share this | Hansard source

I have been worried, before being elected in 2013 and ever since, about the impacts of banking misbehaviour. That means it existed prior to me being in this House. Why didn't Labor do anything about it in the period from 2008? I need to remind those opposite that talking about my missed opportunities to get a royal commission is simply wrong. To get full justice, to get full examination, background and evidence to justify such a commission must first be constructively put in place, and that is exactly what I did. Never mind the rubbish presented by Labor. Most of the significant banking misbehaviour happened on their watch, starting in 2008. Labor were in government and they did nothing for five years. I don't recall a single instance of a call for a commission. We had media on a 24/7 news cycle and a great deal of ignorance both in the community and in the media political analysis. It was purely a political stunt in 2013. Truly, the commission should've been established in 2010, but it wasn't.

In 2016 the Parliamentary Joint Committee on Corporations and Financial Services, of which I was a member, tabled its report on the impairment of customer loans. The committee report determined there had been a persistent pattern of abuse of the almost complete asymmetry of power in the relationship between lender and borrower. It considered that there were a number of factors which created an environment in which small-business borrowers were very vulnerable and that banks were able to exploit that vulnerability. Additional background information related to the wide variation of conduct that was deemed acceptable by lenders due to the significant level of discretion and commercial judgement relating to initial lending and the management of loans and financial difficulty. Complex non-negotiable loan contracts, coupled with gaps in existing legislation and regulation, gave banks the power to behave in ways that, in relation to loans, were unethical, unreasonable and lacked transparency. There were many cases of borrowers in financial difficulty who were unable to pursue their rights through the courts because either the process was unaffordable or they had lost control of their finances. The significant gaps in the coverage of mediation and external dispute resolution schemes left borrowers without the means to have their disputes with banks tested. I must say that we have already addressed a large number of these.

At the end of one of the inquiries in 2016 into banking behaviour, the committee was not able to further investigate the matter as a significant proportion of the answers coming from the financial sector and the banking representatives were contradictory and strange. They seemed to just want to confuse the MPs asking the questions. In September 2016, the Minister for Small Business tasked the Australian Small Business and Family Enterprise Ombudsman to undertake an inquiry into the adequacy of the law and practices governing financial lending to small businesses. She reviewed 23 cases of the thousands that had been reported and found that about a third of the cases were simply poor business decisions where the bank appeared to have acted reasonably; a third were a mixture of poor business decisions and poor banking practice; and a third involved real issues where bank conduct was unacceptable and possibly unconscionable. This indicated the need for investigation into the other cases, and it had to have a regulatory environment with the practices of industry participants. There was an inability for small businesses to obtain justice.

These were just some of the areas of inappropriate treatment of small and medium enterprise businesses by banks: they didn't comply with their communications policies; their communication was poor or misleading; they priced with a focus on debt reduction without due consideration to the long-term viability of customers; they failed to give them proper documentation; they failed to give them proper valuation of their properties when they were making decisions about turning over loans; they failed to adopt some of the fair treatment procedures for customers; they failed to identify and handle customer complaints; and they failed to handle conflict-of-interest events.

Inappropriate treatment of customers can be considered systematic because of a failure of the bank to recognise and manage the conflicts of interest and put in place the appropriate governance and oversight procedures to ensure that a reasonable balance was struck between the interests of the bank and those of the small and medium enterprises. These findings were the necessary background to validate the very expensive process of a royal commission into the banking and other aspects of the financial sector. We were all appalled at the outcomes, some of which we had no idea were going to turn up. I'm proud that we have now painstakingly got the royal commission happening and are getting results. (Time expired)

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