David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018. This bill imposes a new layer of regulation and supervision on the banking sector, overseen by APRA. Its purpose, as stated by the Treasurer in his second reading speech, is to ensure that where community expectations of accountability and integrity of banking directors and executives are not met, appropriate consequences will follow. As a Liberal Democrat I am opposed to this. It is not a legitimate exercise of government to seek to ensure particular businesses meet community expectations. This is a matter for the market. The bill makes no provision for discovering or addressing community expectations. The only expectations to be met are those held by APRA. The bill will not prevent a repeat of the problems in the banking sector examined during the Senate Economics Legislation Committee's five-week inquiry. The bill will have no impact on the manner in which banks serve their customers. APRA will become a de facto additional board of directors with a supervisory role in the appointment of senior executives, their responsibilities and their remuneration.

Of particular concern are section 37C and section 37CA, which require banks and accountable persons to take reasonable steps to prevent matters from arising that would adversely affect the ADI's prudential standing or prudential reputation. APRA will have complete discretion, with no reference to community or any other external standards, to determine whether a bank is complying with this. The only consideration will be its own view of prudential standing and reputation. APRA will have the authority to disqualify a person from acting as an accountable person, depriving them of their ability to remain employed. While an affected person will be able to appeal to the Administrative Appeals Tribunal, this amounts to a reversal of the onus of proof.

The bill requires banks to defer the remuneration of accountable persons for a period of up to four years, with policies that allow for a reduction in remuneration for failure to meet BEAR obligations. The bill also gives APRA the power to direct a bank with respect to the allocation of management responsibilities. These are extraordinary intrusions into the management of a private sector business by public servants. The merits of deferred remuneration are contested in management theory, and entrenching the policy in law amounts to significant overreach by the government. It also amounts to serious conceit to believe that APRA has the expertise to direct a bank as to how to allocate its responsibilities. The cost of complying with the legislation is likely to drive small ADIs from the market and reduce competition. This is likely to adversely affect consumer choice. The bill will increase executive risk, potentially making it more difficult and expensive for banks operating in Australia to recruit talented personnel. This has the potential to adversely affect the international competitiveness of the Australian banking sector.

Finally, the intended date on which the bill is to take effect, 1 July, is absurd given the far-reaching implications for the banks and even the time APRA will need to figure out what it thinks are community standards. If there are failures in the banking sector that are not being addressed by current regulations or market factors, this bill will do nothing to address them. The Liberal Democrats are committed to the principles of a free market unshackled from government intrusion. This BEAR is nothing but a bill with a sore head. It cannot be amended to make it useful, and I will therefore be opposing it entirely.