Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answers given by the Attorney-General (Senator Brandis) and the Minister for Finance (Senator Cormann) to questions without notice asked by Senators Dastyari and Ketter today relating to scrutiny of the banking and financial services sectors.

The unbelievable chutzpah of those opposite in the government and how they have behaved in relation to a possible and necessary royal commission into the Australian banking and financial services sector is shocking. The government were prepared to run political royal commissions into pink batts and trade unions, targeting their political opponents, and at the same time they were not prepared to put up a microscope for investigation into the Australian financial services and banking sector. Enough is enough. There has been scandal after scandal after scandal over the past few years. There is a long list: NAB financial planners, Commonwealth Bank financial planners, the IOOF, Trio, Storm, and CommInsure in the past few weeks. The list goes on and on. There was the potential rigging of the bank bill swap rate. At some point, as a society, as the government and as the parliament, we need to say, 'Enough is enough,' and we have to put some serious scrutiny on the banking sector. More importantly, it has to fundamentally be about the victims and allow the stories of the victims of some of the worst behaviour to be told.

We know some of the stories because of the work of the Senate Economics References Committee's report into the performance of the Australian Securities and Investments Commission. We know the stories of people like Marilyn Swan whose now 90-year-old parents were used and abused by: Commonwealth Bank financial planners. We know the stories of people like Veronica Coulston who spent six years fighting the National Australia Bank, NAB, to get her day and justice. In both of those cases, it took the scrutiny of the parliament and the media for their issues to be resolved. We know the story of the Commonwealth Bank whistleblower, Jeff Morris, who spent years going to ASIC raising these issues and what had happened at Commonwealth Financial Planning. It took the media, through Four Corners and Adele Ferguson, a Fairfax journalist, and the subsequent work of the Senate Economics References Committee to shine a light on that issue. Scandal after scandal; victim after victim. We know some of the stories, but there are so many stories out there that we do not know about yet. We know of tens of thousands of people who have been affected by these scandals.

Unless we have a proper royal commission, unless we have an opportunity to shine a light on this dark corner, those issues are not going to be resolved. An argument has been put out repeatedly by the government and others: 'We don't need one because we have a tough enough cop on the beat. The Australian Securities and Investments Commission does a tough enough job.' Let's just dispel that once and for all. The 520-page Senate Economics References Committee report into the performance of the Australian Securities and Investments Commission highlights failure after failure. We know there have been cuts of $120 million to that agency by the government and we have heard from the chairman himself about the impact, but only a royal commission can look at ASIC itself and can look at the powers of the regulators. The regulators themselves have only been looking at individual cases and issues. It is time the victims were able to tell their stories, it is time the victims had their stories properly heard and it is time we had a proper detailed investigation.

I say to those opposite, 'If we don't come to parliament to look after and try to give a voice to those who are powerless, to those who are weak, to those who have been trod on and to those who have been taken advantage of, why go into politics?' If you are simply here to look after the interests of a handful of corporations and larger banks, why go into politics in the first place? The victims deserve to have their stories told.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

I may not be alone in finding extraordinary the demands by those on the other side, and Senator Dastyari in particular, to have a royal commission, given their intransigence and refusal to acknowledge that the Cole royal commission came to a number of very relevant findings about systematic abuse within the union movement. That is not to damn all unions with the same condemnation, but I do find it extraordinary that they think in this case a royal commission into the banking sector will somehow give victims a chance to ventilate their grievances and relate their cases and stories and yet, somehow, the Cole royal commission did not allow genuinely aggrieved people to do the same.

Senator Dastyari—and I quite genuinely think that he does believe that there needs to be further investigation in this area—is ramping it up, if I may characterise it like that, for political purposes, when he says that not only have there been substantial inquiries and a 530-page report by the Senate Economics References Committee that display some of the egregious offences by the banks, but that that is not enough and that we need to go further. Well, what I would respectfully suggest to Senator Dastyari and to my colleagues here in the Senate is that we need to implement some significant reforms arising from that Senate committee before even contemplating having another inquiry of any description into it. There is no doubt at all that the banking sector in this country needs to be reformed. There have been calls all around the world for reforms like this to take place.

One of the great issues that has been facing Western economies is that many of the banks have become trading banks—transactional banks—instead of relationship-oriented banks. They are looking at their customers as merely a means of turning a profit rather than as custodians of their customers' wealth and savings. They are using those savings to go out and punt in forex markets, to rig markets or engineer financial products, and then, ultimately, when it all turns turtle and goes bad, the government, because they are the guarantor of these banks, have to bail them out. That is one of the fundamental problems we have: the government is backing these banks, and the banks are not treating that guarantee in a respectful light.

One suggestion, which is in the process of happening internationally, is to separate the trading functions from the custodian functions of the banking sector—that is, to allow the custodian banks to make their margin in lending and things of that nature but not to engineer financial products. They have to separate and isolate their various units around the place. Now I am not saying that that is the answer, but it is one suggestion that perhaps should be examined. We do not need a royal commission to do that. We have to look at the problems with banking all around the world and ensure that they do not manifest themselves in this country any more than they have already.

But I make this point, which goes back to the union royal commission and the ABCC bill that is before this parliament—I am not going to get into that, though. We are trying to make people more accountable for the choices that they make on behalf of their organisations. Where we have circumstances where there is systematic abuse within sections of the banking community or the union community or anywhere else, then individuals need to be held to account.

It is not good enough to slap a corporate and say. 'You've got to pay $5 billion worth of fines', like they did recently with Goldman Sachs in America, or with any of these other investment banks that have been operating around the world, where they were caught rigging, stealing and conning people out of their money. That is not good enough. People need to be held to account. You should not be able to buy your way out of a corporate malfeasance of such significance that it risks bringing down the financial system, or imperils the savings of millions, thousands, tens of thousands—whatever it is—of Australians and which may result in the government having to bail out that sector of the community. It is not good enough that people are not held to account for it.

I want to go back to 2008 in America. The Lehman Brothers crisis was brought about by poor lending standards, misrepresentation and poor practice of the banks. I do not know that anyone has gone to jail as result of that. Sure, billions of dollars of fines have been paid. But those fines have been paid out of the profits that have been generated by ripping off the system, and the government bailouts in America have only enriched bankers. We have to prevent that from happening here. We do not need a royal commission. We need tighter standards in force, and that requires legislative action. (Time expired)

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to put remarks on the record with regard to the questions that were asked of Senator Brandis and Senator Cormann at question time today. One thing that is absolutely clear is that the confidence and trust that Australians had in banking institutions, and particularly the financial services sector, has been increasingly shaken throughout the course of this year, and over the last period of years, with the revelations day after day of scandals that have seen tens of thousands of Australians being ripped off.

As the chair of the Parliamentary Joint Committee on Corporations and Financial Services in the last parliament and as its deputy chair in this parliament I have had a front-row seat to the sort of tragedies that Senator Dastyari put on the record here this afternoon—the Trio scandal, the Storm Financial scandal, the Timbercorp scandal, and the CommInsure scandal that the Australian people have just been alerted to through the very good investigative journalism of Adele Ferguson. The Panama Papers are revealing an integration of banks into a system where money is moving around the world in corrupt ways, preventing transparency and the opportunity for fair taxation across the whole global economy.

Right now in Australia we understand that retirees have had their retirement savings absolutely gutted. I want to go to evidence that I received in an early day of doorknocking on the Central Coast in the seat of Robertson, which is relying on Labor to stand up for ordinary people who need banks to do the right thing and to be transparent. I recall knocking on a gentleman's door on a Saturday morning. He had worked all his life and he said to me, 'The only thing I wanted to do was have enough money to be able to take my family out for dinner on the odd Saturday night and to look after myself and my wife in our retirement.' He lost everything. He was about to put his house on the market. He lost everything because he was caught up in the Trio scandal.

This sort of behaviour by the banks—their culture and their set of key performance indicators—has distorted ethical behaviour and made it palatable within the banking sector, and within the financial services that are sitting within the banking sector, for people to do the wrong thing. Ethical standards have to be articulated and they have to be maintained. Families have been rorted out of hundreds of thousands of dollars.

In the most recent inquiry, which the Parliamentary Joint Committee on Corporations and Financial Services should be reporting on in the very near future, we have been investigating constructive default in the area of small businesses and small business loans. ASIC before the Senate committee, in this building, in a committee room not too far away from here, one evening were talking to us about the challenge they face in trying to bring to bear some power and some control over the standards of contracts that exist. Small businesses were signing up to contracts that were essentially declared to be unconscionable contracts, so excessively weighted in favour of the banks and against the interests of the small business owner that they prevent small business owners from ever getting redress from the banks when they are manhandled and abruptly and inequitably treated.

We know that the Prime Minister made some remarks that were called 'chastising remarks' to the banking sector in the recent celebrations of Westpac, but chastising remarks are not enough. To say, 'There have been too many troubling incidents over recent times for them simply to be dismissed,' is just not enough. That is why Labor is calling for a royal commission into our banking sector to make it a safer, more equitable, more transparent place in which Australians can be sure that the money that they have worked very hard to gather and that they want to invest in businesses is going to be handled properly in our banking system rather than seeing the extraordinary abuse of power that we currently see in too many sections of our banks.

We have seen eight of the Liberal and National parliamentarians defying the Prime Minister and making it clear that they also support a royal commission: Senator John Williams, who is on the committee with me, and Mr Warren Entsch, just to name two. There are others around the country: eight parliamentarians from their own ranks who are willing to stand up and say it is time for a royal commission—not a fake royal commission but a genuine royal commission into banking in this country. (Time expired)

Linda Reynolds (WA, Liberal Party) Share this | Link to this | Hansard source

I too rise to take note of the ministers' answers. The hypocrisy that is wafting over to this side of the chamber is almost overwhelming. Those opposite, who are now so stridently calling for a royal commission into these matters, are exactly the same members who only recently said that this royal commission was not necessary and have just been spending all morning saying how much they do not agree with royal commissions.

This government absolutely recognises that Australian banks and banking executives have not always lived up to the standards expected by our community. That is absolutely right, but this government will not be appointing a royal commission into banking and financial services. Why is that? Because we already have organisations with the same power, if not more power, as a royal commission to investigate, prosecute and act on these matters. What those opposite are calling for is yet another review and inquiry which will take hundreds of millions of dollars of taxpayer money and another three years. If anything demonstrates the difference in policy and approach, on this and many other issues, between the two sides of this chamber, I think this is it.

The royal commission has no power to enforce the law, whether through taking prosecution action against a person or body or by making a finding of breach of the law. ASIC, on the other hand, has strong powers to compel a person to answer questions under oath, compel the production of documents, seek search warrants, conduct investigations in a public forum, and then use the information in prosecutions—arguably much stronger than anything the royal commission could ever do, since it cannot investigate and take actions that lead directly to prosecution.

In fact, in direct contradiction to what those opposite have asserted, ASIC have commenced legal proceedings already against banks which are alleged to have engaged in market manipulation during the period from 2010 to 2012. They have commenced an investigation into the allegations surrounding CommInsure and the broader life insurance sector, and they are also undertaking investigations into the conduct of large financial advice firms under their wealth management project. Those opposite are now suddenly, out of the blue, calling for a royal commission which would grind this all to a halt instead of allowing ASIC to continue the investigations and possible prosecutions which would arise from those investigations. We absolutely need to continue to ensure that ASIC is operating effectively. This is why the government has commissioned a review to consider its capabilities and why we are considering the appropriateness of ASIC's funding to ensure it can adequately investigate and prosecute any findings of wrongdoing—which is already underway without a royal commission.

I would just like to remind the chamber that Labor were in government for six years and never once—not once—looked at the Australian financial industry. In fact, in June last year Labor voted to reject a Greens Senate motion to hold a royal commission into the financial sector—exactly what they are calling for today. But this, as we all know, is just a cheap but potentially very damaging stunt which could actually hurt the country a lot and put a lot more uncertainty into the financial sector. We all know it is about the classic Labor tactic of diversion: 'Let's not have a look at the royal commission we already have and the findings of endemic corruption, bullying and a whole raft of unlawful activity that's been found yet again arising in the building and construction industry, mostly from the CFMEU.' Over 100 CFMEU officials at the moment are up before the courts on charges relating to engaging with bikies, enforcement, criminal activity of all types, kickbacks and standover tactics, right of entry breaches, blockading of sites, unlawful industrial action and—probably most of all for the nearly one million workers in the construction industry today—abuse, intimidation and revolting conduct that would never be acceptable in any other workplace in this country. When you have a look at what is before the courts and what has come out in the royal commission report, it is no wonder the Labor Party do not want anybody in this chamber and certainly anybody in the public really looking at the findings of the trade union royal commission. So this is classic Labor: 'Don't look at that royal commission; let's have another one instead.' (Time expired)

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I can hardly think there is a case in our history where there was more justification for a royal commission. It cannot be more clear at the moment. We need to only look at the multiple inquiries of the Senate Economics References Committee, which I chair. Since 2014, there have been no fewer than five major inquiries into financial misconduct. These have included: scrutiny of financial advice, corporate tax avoidance, matters relating to credit card interest rates, forestry managed investment schemes and the parliamentary joint committee into the impairment of customer loans. All of these inquiries have related to matters which have disadvantaged thousands of Australians, taken their life savings, charged exorbitant fees, misled the customer and failed to deliver a service that would benefit the customer.

In that light, it is so disappointing to get responses from Senator Cormann in relation to the questions that were put to him. I asked about the $120 million cut to ASIC and the fact that Mr Medcraft identified, back in 2014 when these cuts occurred, that 'proactive surveillance will substantially reduce across the sectors we regulate, and in some cases stop'. Now, if that is not a case of ignoring the warnings of Mr Medcraft at the time then I do not know what is. We had a government in 2014 which proceeded with those $120 million cuts to the capacity of ASIC. Senator Cormann referred to Senate inquiries and the capability review in his response. We know the government are scrambling at the moment to look at trying to repair the damage that they have done to ASIC, but there are a number of questions to be asked, there, in relation to ASIC. We have the important position of the chairman of ASIC, which expires on 12 May, and we are still waiting to hear from the government as to who will be the replacement person for the chair position. We have seen that this government has failed to provide additional powers and penalties that were recommended by the financial system inquiry. This government is now, at the last minute, scrambling to try to head off the royal commission which has been called not only by Labor but by at least eight of the government's own backbenchers. I see in recent opinion polls that a royal commission has the support of nearly two-thirds of the Australian people, including a majority of those people who identify as coalition voters.

We know that an earlier inquiry into ASIC's performance was tabled on 26 June 2014, and just one day before that, 25 June 2014, the Senate initiated a very long and harrowing inquiry into forestry managed investment schemes—a major area of investment malpractice that fell within ASIC's regulatory purview. The committee's findings echoed those of the earlier report into ASIC that it was slow and reluctant to act on early warning signs of corporate wrongdoing. We know that ASIC has tried to improve its performance and one must commend some of the comments that have been made by Mr Medcraft, the current chair, looking at culture and then trying to address some of those issues. But it is extremely frustrating for the chair, I would imagine, to be trying to address these issues while at the same time facing $120 million in budget cuts, which he identified would affect their capacity to address these issues on behalf of the Australian people.

I believe that Australians are not being served under our current regulatory framework and that much needs to be done to correct this. Matters that have been raised before the Senate committees have been widespread and pernicious. They indicate systemic abuse under a lax regulatory environment by our trusted financial institutions for the benefit of their shareholders and no-one else. The Turnbull government's response to date has been one that we might expect of someone who is, himself, an ex-banker. If today's Australian Financial Review is to be believed, the government is scrambling around to try and put together a convincing set of actions to avert the royal commission that most Australians want. We need to urgently close down this issue once and for all, and this can only be achieved if the government appoints a royal commission into the banks.

Question agreed to.