John Williams (NSW, National Party) Share this | Hansard source

No, not likely. But, you see, I'm a member of the National Party. And my friend here, Minister Ruston, sitting in front of me, is a member of the Liberal Party. On this side of the chamber, you're free to vote where you like. I exercised that freedom to cross the floor and vote with the Greens. Many Liberals and many National Party senators and MPs have done that over a long period of time. On this side of the chamber, we're very proud that we are free to vote where we wish to vote. But, of course, Senator Cameron and Senator Dastyari voted over there with the noes. You'd remember that, Senator Whish-Wilson. They wouldn't back their arguments up. They wouldn't come over and vote with us going for a royal commission. So, I think it's just a little bit over the top that Senator Cameron goes on with his spiel here about royal commissions into the finance sector. He was in government when they could have done it—he could have come and voted with us when the Greens called for it, but he didn't.

However, we move on. As I said, I'll speak about this legislation in summary, but I wish we weren't bringing it forward. When was the last time Australia had a royal commission into the banking sector? I'll tell you when it was: it was the early 1930s. There was an election. The United Australia Party did not secure the numbers to govern. So they went to the then Country Party's Sir Earle Page and said, 'We may have to form a coalition to form government.' Sir Earle Page said, 'That's fine. We went to the election promising a royal commission into the banking sector'—the then Country Party did; it is now, of course, the National Party. So they had the royal commission. Out of that came the licensing of banks and the transparency on declaration of their profits. That was driven by the Country Party, demanded by that coalition forming government. History does repeat itself, doesn't it, because you know very well my colleague Senator Barry O'Sullivan—who, I must admit, and I'm his whip, can't be pushed around in this place very easily—pushed strongly for this royal commission. But I wish we didn't have to have it.

Back in the seventies, I grew up in Jamestown. You know very well where that is, Mr Acting Deputy President Bernardi; it's in your electorate. I remember that Malcolm Axford, son of farmer Rex Axford and Mrs Axford, was appointed to a job when he left school—I think leaving was the year, not matriculation—with the local bank. That was the talk of the town, to get appointed to the bank. It was, 'Well, you're the luckiest person in the district! It's a job for life; a very proud job; a very respected job.' In the seventies, when I was a young feller shearing sheep, driving trucks and working on my father's and brother's farm, the most respected person in the town was the local bank manager. Of course, in a little country town like Jamestown in the mid-north of South Australia, everyone knew the bank managers—everyone.

Sadly, that is not the case today, because I believe this culture of profit, where the loans officers have to meet so many targets for lending each month, and where the investments officers also have to meet targets, perhaps has led to wrongdoing. When we launched the inquiry into ASIC, out of that came all the financial planning wrongdoing, and of course that followed on from where it all started, back with the first inquiry into Storm Financial—the PJC on corporations and financial services, kicked off under former Labor MP Bernie Ripoll. Out of that came the FOFA, the Future of Financial Advice, agreements. And the ASIC inquiry, of course, brought out a lot more. So it went from one incident to another.

We met with people who had been severely damaged. To go back to Storm Financial: it was destined to fail from day one. If we'd had Storm Financial today, with the last two nights of the stock market in America and now in Australia tumbling, those trigger points would not have been met. But people were told, 'Mortgage your house. Gear up.' If you had a house worth, say, $1 million, you'd borrow $500,000 against your house and use that as a deposit on a $3 million loan. You had $3 million worth of shares. That's how Storm Financial worked. Those $3 million worth of shares would pay you a retirement fund of, say, $50,000 a year and meet the commitments on your $3 million loan. Well, that's all fine while the market's going up and the dividends are going up. But, just like aeroplanes, they can go up but they have to come down to refuel at times. We see that in the stock market often.

When the 2008 global financial crisis crash came along, it was brought about by bad banking in America. It was President Bill Clinton who caused the changes in the rules. A bank could have five per cent subprime loans; the rest had to be prime loans. So they kept the five per cent, but Mr Clinton altered the legislation, the rules, so that the bank could sell off their five per cent of subprime loans—and they were not good loans at all; history will tell you that. Then, when they sold them off to local councils in Australia investing money or to people in Europe or wherever, they'd have another five per cent of subprime loans, and then they'd sell them off.

Of course, it all turned to tears when the real estate industry in America got into trouble. The stock market crash came and we had the case of Storm Financial and many other wrongdoings being carried out. Since that time, we've seen the mess in the financial planning industry. I must give ASIC credit—something I don't do very often—because last year they banned 46 financial planners, which is a big improvement in the job. We have the register up and running now. We have new training laws in place to lift the standards of financial planners. The people I really feel sorry for are those thousands and thousands of good financial planners in Australia, who have done the right thing, who have put their clients first and put them into safe investments. But it's always a minority. Of the small percentage of bad financial planners who were banned, one in particular comes to mind. Ricky Gillespie pleaded guilty to criminal charges just recently. He was fined $3,000 and no conviction was recorded. What about the clients he destroyed? I think he got off very lightly. However, we'll leave people to form their own opinion on that.

Senator O'Neill, who's sitting opposite me, and I have been winding up a long parliamentary joint committee investigation into life insurance. The committee will probably report next week, I'd imagine, Senator O'Neill. It's a big report. Why was it brought about? By life insurance companies doing the wrong thing, cheating outdated medical qualifications and criteria, where people who'd had a heart attack were not paid their trauma insurance. We heard all about that, and I'm sure Senator O'Neill will have more to say about that next week when the report comes out.

We've got the bank bill swap rate, where ASIC, to their credit—I'll give them credit again—have taken NAB, Westpac and ANZ to court. Westpac are fighting the case and I'm not going to comment on that; I'll leave that for the courts to decide. But there have been settlements with NAB and ANZ; I think a total of $100 million between them. One would think that banks don't throw away $50 million if they think they're on very sound legal ground. It's not normal for them to do that. Then, of course, we've got AUSTRAC. This is the biggest concern of all—the 53,000-plus cases of breaches of AUSTRAC regulations that are in front of the court now, where money was deposited in the Commonwealth Bank's IDMs, their internal deposit machines. Apparently, the settings on the machines were wrong and they were breaching the law in not reporting on deposits over $10,000. Where was that money going? We don't know. Time will tell, but it is alleged that some of that money was going overseas to drug lords, some even going overseas to finance terrorists—terrorists who want to kill ordinary, innocent human beings. It is very scary.

Who's to blame for all this? As I said to one senior bank officer, you've only got yourselves to blame if you have a royal commission. It's this culture of profits before people no matter what, and people meeting targets and getting bonuses—'Can we get a bit of money out of this to increase profit?' I know it's tough for the big institutions. If you've got 40,000 or 50,000 people working for you, it's extremely difficult to keep an eye on each and every one to see they're doing the right thing. Crime's been going on for a long, long time. As I said, it is disappointing that we have to bring this legislation forward. I wish we didn't have to.

I will go through some of the ASIC media releases of the last few weeks. There was 'ASIC reports on how large financial institutions manage conflicts of interest in financial advice':

The review found that, overall, 79% of the financial products on the firms' approved products lists (APL) were external products and 21% were internal or 'in-house' products. However, 68% of clients' funds were invested in in-house products.

The approved product lists—we're familiar with those through our life insurance inquiry. I'm sure Senator Ketter and Senator O'Neill are very familiar with those. On 18 January: 'ASIC acts against ANZ for breaching responsible lending laws in its former Esanda car finance business.' Civil penalties are proceeding. On 18 January again: 'ASIC bans former Commonwealth Financial Planning adviser for 5 years.' I won't name the lady. She's probably embarrassed enough now, but if what ASIC's done is right, she's only got herself to blame. On 17 January: 'Suncorp refunds $17.2 million in add-on insurance premiums.' That is another issue. On 19 December last year: 'NAB refunds $1.7 million for overcharging interest on home loans.' Why? On 14 December last year: 'Westpac refunds $11 million to interest-only customers.' This is some of the work that ASIC has done. I do believe they've lifted their game.

This legislation is basically saying, 'You, at the top, are responsible'. That's how it should be. If one of my staff make a mistake in the media or on one of my entitlements or my travel claims—it's almost hypothetical, because I have very good staff, the same four staff, who have been with me for 9½ years. That situation is probably pretty rare around here. They know their job. But if one of them makes a mistake, the buck stops with me. I can't blame my staff. I'm the boss. It stops with me. Likewise with these institutions, the buck stops with those at the top. They are responsible for the culture, the management and those underneath them. That's what this BEAR legislation is doing. It's saying, 'Righto, you at the top: lift your game.'

I was only saying to Ross Greenwood on 2GB last week, a very good bloke and a very decent business reporter: 'I have confidence in Catherine Livingstone at the Commonwealth Bank. I think she, as the chair, is determined to see that the wrongs are righted, the culture is changed and their reputation is repaired.' That is likewise with many institutions, not only the big banks. There's one person—I won't mention his name—who's been charged for $100 million that's disappeared on the Gold Coast. As a good friend of mine once said: 'Years ago, robbers rob with a pistol or a gun; now they rob with a biro.' That seems to be the case, and we need to clean this up for future generations.

I hope the royal commission brings out all the wrongdoings, and those who've done wrong are punished or made to pay restitution. Hopefully we have a royal commission where everything's squeaky-clean. Hopefully that'll be the case, because we need to return confidence back to our finance institutions, whether they're financial planners, life insurers, advisers, whether they're lending us money, investing our money or whatever. I think this whole culture of profit—look, don't get me wrong; profit is a very good thing. If a business doesn't make a profit, it goes broke and then everyone loses their jobs, but you have to make your profit fairly and honestly.

I am very grateful that we have strong financial banks in Australia. Each and every one of us—probably the whole lot of us—needs a bank at some stage of our lives, whether it be a credit card, personal loan, home loan, car loan or whatever. We depend so much on the banks. We virtually can't exist in this day and age without assistance from the banks and the service they provide. I hope they remain profitable and strong, but they have to do it in the right fashion and change their reputation. As I said, it's disappointing we have to do this legislation. I support it, but it's a case of saying: 'Righto, you at the top, see that your business is doing the right thing. See that you do the right thing in the future.'

With a royal commission now proceeding, there'll be a lot of submissions, no doubt. I've been talking to some people who are having a few problems. I'm not going to disclose them here and now. Let's hope that the culture does change, that the reputation changes, that the banks, life insurance companies and planners et cetera do the right thing for the future. Let's hope we can look forward to decades—not just years, but decades—of total confidence in our financial institutions, that their reputations are repaired, that people's faith in them is restored and that they have good, honest leadership to see they do the right thing. With that, I commend the legislation before us.