Tania Lawrence (Hasluck, Australian Labor Party) Share this | Hansard source

I am a member of the House Standing Committee on Economics and regularly hear from the Australian Prudential Regulation Authority. APRA does essential work in helping to ensure that our financial system is the best that it can be. Of course, there will always be room for improvement, and part of our role as parliamentarians and committee members is to find ways, sometimes legislative ways, to help APRA improve. That said, it is part and parcel of the role of APRA, as with all such authorities, that it be able to do its work independently. The member for Groom is not a stranger to the work of the House economics committee, given that he is a member of it, and he therefore knows this.

The independence of APRA is a part of the trust that underpins its regulation activity, and the government respects that independence. Our well-regulated banking sector enables us to better weather crises. We have seen runs on banks and building societies from time to time, and, when there is a global economic crisis—which also occurs—we need to ensure that we are not just willing to deal with the threat but that we are able to do so. The limitation of liquidity risk is central to APRA's role. The member for Groom used the word 'unnecessary'. None of this is unnecessary—quite the opposite.

The Silicon Valley Bank collapse in March 2023 sent shock waves around the USA and around the world. It was the third-largest banking collapse in US history. Banking systems in different parts of the world experience challenges and crises from time to time. It would be nice to feel that some countries are immune and that a banking crisis somewhere else in the world does not hold lessons for Australia. In fact, the interconnectedness of the global financial system means that contagion is a real and significant danger both within and between national systems. The year 2008 taught us that quite clearly.

APRA are considering changes in the liquidity and capital requirements for smaller banks in Australia and are doing so in the wake of the recent Silicon Valley Bank collapse. It is not a coincidence. Arguably, any regulator in any country around the world which does not review its settings on a regular basis and particularly after a spectacular failure, which is what the Silicon Valley Bank was, is simply not doing its job. The concerns about the Silicon Valley Bank that motivate this review are real. The Australian Financial Review describes that bank as having been 'eviscerated' in the course of just two days.

APRA are at the sharp end of our efforts to ensure that our system as a whole is healthy enough to withstand a shock to one part of it—to guarantee that the failure of a bank won't cause a contagion that infects others, including the larger banks. APRA commenced its consultations on this matter a year ago. The proposals involve a narrowing of the gap in requirements between banks of different sizes, and they do not otherwise propose to treat smaller lenders in the same way as large ones.

As I say, a responsible regulator cannot simply shy away from the need to reconsider its settings, and APRA has not done so in a vacuum. Contrary to the statement in this motion, it received 35 submissions from entities, individuals and industry bodies during the formal three-month consultation period, and reached out to do further work with industry stakeholders. APRA now proposes that banks subject to the Minimum Liquidity Holdings regime for calculating the liquidity requirements will be required to adjust the value of their liquid assets regularly for movement in market prices and that all banks must be operationally ready to provide certain key information regarding their financial position when requesting exceptional liquidity assistance from the Reserve Bank of Australia. These two measures will come into effect from 1 July 2025. Further action will be considered, and, in the meantime, APRA expects all institutions to take steps to improve the diversification of their portfolios to support liquidity.

APRA has here struck a balance between consumer safety, competition and efficiency. The member for Groom doesn't like the balance. The regulator is independent. I am alive, however, to the concern around the need to support competition in the sector and to support our community-owned banks, among others. The introduction of a financial sector regulatory initiatives grid by the Albanese government on the back of the House Standing Committee on Economics report into competition will— (Time expired)

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