David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics I present the following reports, together with the minutes of proceedings: Review of the four major banks: Third report, incorporating a dissenting report; and Review of the Australian Securities and Investments Commission annual report 2016.

Reports made parliamentary papers in accordance with standing order 39(e).

by leave—Since the House of Representatives Standing Committee on Economics commenced its inquiry into Australia's four major banks in October 2016, we have held three major rounds of hearings. Of course, our April report contained 10 recommendations, nine of which were adopted by the government in the May budget in relation to consumer complaints, the Banking Executive Accountability Regime, new powers to the ACCC in relation to interest rates, establishing an open data regime to increase competition in the sector and also improving regulatory requirements to make it easier for banks to get off the ground, because at the moment it's very, very difficult.

In October of this year, the banks appeared before the committee in the third round of public hearings. One of the critical issues which forms the basis of recommendation 1 of this report concerns so-called tap-and-go payments. What happens at the moment is, if a consumer has a debit card that also has credit functionality—an EFTPOS and visa functionality, known as a debit card—and presents that in a payWave or tap-and-go function, that the banks route that payment through the credit network. What that means is that merchants pay higher fees than they would if it went through the EFTPOS network. Ultimately, the merchant may pass on those fees to customers. Those fees are estimated at hundreds of millions of dollars.

The committee is strongly of the view that the banks should be required to give merchants the choice about whether those payments are routed through the EFTPOS network or through the international credit scheme network. This is a very, very important point. The Retailers Association estimates this issue costs merchants $290 million per year and, of course, that money has to come from somewhere, and that somewhere ultimately is customers. So it's very, very important that the government adopts recommendation 1 of this report, which is that, if the banks don't voluntarily provide this choice to merchants by 1 April 2018, the Payments System Board should take regulatory action to require it to happen. This issue should have been addressed earlier. It certainly should be addressed by no later than April of this year. It is good that the ANZ has committed to do this in the public hearings. The other three banks need to follow up on that and implement this immediately.

I won't detain the House, but I would note that another important issue raised in the hearings was the imposition of increased interest rates on borrowers in interest-only loans. The banks argued that this occurred in response to regulatory requirements of APRA. The ACCC, using its new powers following on from the recommendation of this committee, is now investigating that issue to determine whether the banks' public statements about these interest rate rises were, in fact, accurate or misleading and deceptive. It's a very important issue and it's very important that the ACCC conducts very granular analysis. What that means is that the ACCC needs to really understand the mechanics of the financial modelling and financial estimates of the banks. It needs to take that very granular and very detailed information and compare it to the public statements of the banks. And the ACCC, using the horsepower which, no doubt, it possesses, needs to determine whether or not what the banks have done was misleading and deceptive, and the committee certainly awaits that report with interest. Of course, the issues related to the Commonwealth Bank and the AUSTRAC allegations against it are very serious and formed an important part of the inquiry, and the report contains a recommendation in relation to that matter as well.

We table the committee's report in relation to the recent ASIC hearings. We discussed a number of matters related to the banking sector such as the Financial Complaints Authority, the Banking Executive Accountability Regime and other matters. The report goes through these issues in some detail. On behalf of the committee, I thank the chairman of ASIC, Mr Greg Medcraft. It was his last appearance before the committee at the hearing on 14 September. The committee thanks Mr Medcraft for his service to the nation in his capacity as chairman of ASIC and we wish Mr Medcraft every success in the future. I commend both of these reports to the House.

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

by leave—I join with the member for Banks in congratulating and thanking Mr Medcraft for his service as the chairman of ASIC over many years and as the chief regulator of practices within the banking industry. In respect of the ASIC report, the hearing focused on competition in the banking sector and the reason for recent interest rate increases. Members of the committee probed ASIC regarding the changes to prudential rules that APRA recently introduced and the fact that many of the banks, in the wake of that, had pushed up their interest rates when APRA had given evidence previously that there was no reason for that to occur. And important discussions continued around the failures of financial advisers and investigations into the bank bill swap rate scandal.

I took the opportunity to question ASIC regarding regulatory guidance 97, which addresses how super funds and other financial products disclose their fees and costs. It's due to come into effect at the end of this month and RG 97 is not a level playing field, in effect, in that it exempts the bank super fund platforms. In essence, ASIC wanted to make sure that the fees and costs of interposed entities were consistently reported across managed funds and the super sector. However, in practice, super fund platforms were exempted and additional fees and costs from the interposed vehicles associated with platforms are exempted. Since the platform will only include fees and costs of the platform, and the investor will have to get the fees and costs of their various investments made through a platform from another source, this means that bank owned super investment platforms are going to look artificially cheaper. There are a lot of investments that are subject to platform exemption and estimates are that up to $500 billion in assets are managed under platforms. Mr Kell admitted and told the committee that RG 97 had been a point of contention. There had been numerous articles in the media but, nonetheless, ASIC was working to ensure that there weren't any differences and that the platforms acted equally.

In respect of the banking inquiry, this was the third round of hearings with the bank CEOs appearing before the economics committee. It possibly could be the last, given that the Turnbull government has agreed to a royal commission. For 600 days the Prime Minister and representatives of the government ignored the pleas of victims, ignored the pleas of whistleblowers and ignored people who had been calling for a banking royal commission—indeed, many of the Liberal and National Party MPs. The call for a royal commission originally came from a Senate inquiry into wealth management scandals at the Commonwealth Bank, and it was Labor and National Party MPs that recommended a royal commission to government. The government ignored that recommendation for 600 days. Then, of course, the bank executives wrote to the government, and the government rolled over and have given us a royal commission.

Labor members of the committee made a number of recommendations in a dissenting report in respect of the banks. The government should appoint more commissioners to deal with the royal commission workload. They've only got a year to deal with this and they're going to have to take a heck of a lot of evidence on all of the scandals that have occurred in wealth management and insurance and on the AUSTRAC issues and other areas of banking, so they need to appoint more commissioners. The government should extend the terms of reference for the royal commission to include matters that look at the treatment of victims, in particular, but also at the culture of banks, executive remuneration, consultation with victims groups, protection for whistleblowers, regulation and oversight, the conduct of liquidators where they relate to the financial services sector and what's going on internationally and whether or not regulation is adequate. Once again, I thank the members of the committee and the secretariat and those that were involved in these hearings.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the Review of the four major banks: Third report.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned. The resumption of the debate will be made an order of the day for the next day of sitting.