Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table an explanatory memorandum, and I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This Bill establishes a Parliamentary Commission of Inquiry into the banking and financial services sector.

This Bill acts on the will of the Parliament for such an inquiry in the absence of action by the Executive Government to issue Letters Patent for a Royal Commission.

This inquiry operates identically to a Royal Commission, but reports to the Parliament, rather than the Government. It is needed to hold the banking and financial services sector to account.

Banking and finance has become an essential service. It is a fundamental part of a modern economy and modern life. It allows transactions for goods and services to occur; provides for the mitigation and distribution of risk; and, when operating properly, directs investment into meaningful economic activity.

As the custodians and intermediators of other people's money, the banking and finance sector are granted a privileged position in our society.

This privilege is evident in the guarantees provided by government regarding the continued operation of the sector. This includes explicit government guarantees on deposits and liquidity, and an implicit government guarantee backing those institutions that are too-big-to-fail.

This privilege is also given over by customers on the basis of trust. Every day, businesses and households deposit and withdraw money, make payments and investments on the basis of trust. Trust that their money will be there when they need it and that the services they are paying for will be provided fairly and as understood.

This trust has broken down and it urgently needs to be repaired.

In recent years, the continuous revelations of misconduct within the banking and financial services sector have undermined the trust of customers and have revealed issues that go the stability of the Australian financial system and the performance and resilience of the Australian economy.

This inquiry will reduce risk and improve stability in Australia's financial system. It will allow us to carve out and cleanse the corrosion that threatens the entire system. As a result, our financial system will be stronger and more resilient, and it needs to be.

The events of September 2008, the unravelling global financial crisis should still be fresh in our minds. The crisis could have been averted, or at least minimised with a properly regulated and properly incentivised banking and financial system. The recent scandals uncovered in the Australian banking and financial sector indicate that problems persist in the ethical standards, culture and structures of the sector. It places us all at risk.

Misconduct has been uncovered at the financial advice arms of four of the five largest banks, namely the Commonwealth Bank, National Australia Bank, Australia and New Zealand Banking Group (ANZ) and Macquarie. The fifth of these five largest banks, Westpac is facing court action for breaching mortgage lending standards, and other banks are under investigation for similar activity.

Commonwealth Bank, National Australia Bank and ANZ were all involved in the impairment of customer loans, particularly in rural areas. ANZ and Westpac have been charged with rigging overnight interest rates. The Commonwealth Bank is facing allegations of fraudulently denying life insurance claims. IOOF have been charged with insider trading. And the collapse of forestry investment schemes has implicated ANZ and Bendigo & Adelaide Bank.

These scandals have been uncovered thanks to the bravery of whistle-blowers and the determination of investigative journalists. Inquiries of parliamentary committees and Government have also helped examine these matters. However the full extent of misconduct with the banking and financial services sector has not been discovered, particularly given the limited time and resources available to committees of the Parliament, and the inability to utilise expert legal cross-examination and forensic analysis.

The coercive powers of inquiry established by this Bill mimic those typically granted to a Royal Commission. However, in contrast to a Royal Commission, which is the prerogative of the executive to establish under the Royal Commissions Act 1902, this Bill expresses the wish of the Parliament for such an inquiry, and for this inquiry to report to the Parliament.

Section 51(xiii) and (xiv) of the Constitution gives the Commonwealth the powers over banking and insurance, and (xx) over financial corporations.

This Bill further defines the banking and financial services sector in accordance with these sections to cover authorised deposit taking institutions (banks), insurance companies, superannuation funds, credit providers (including payday lenders), financial advisors, financial product retailers, or any other financial services license holder.

The Parliament will appoint a single Commissioner, who is a former Judge, to examine these matters. They will be empowered to examine the extent of misconduct with the banking and financial services sector, the impact of this misconduct on individuals and businesses, and that the risks that this misconduct and other activity poses to the financial system and broader economy.

The Commissioner will also be empowered to establish the causal factors of misconduct, including misaligned incentives, culture, inadequate regulation and regulatory power, and 'moral hazard' extending from government guarantees. The Commissioner will have the authority to prioritise those issues that have the greatest potential harm to society.

The Commissioner will be given powers to compel witnesses and the production of evidence so as to properly inform their inquiry. These powers are essential to the exhaustive examination of the terms of reference. These powers are not practically available to the Parliament other than the establishment of properly resourced Parliamentary Commission of Inquiry.

The Commissioner will report to both the House of Representatives and the Senate. Importantly, this report is to be tabled in parliament and, thus, made available to the Australian public at the same time as it is made available to the executive and other members of Parliament.

In summary, this Bill ensures that, in the absence of commensurate action by the executive, the 45th Parliament does everything in its power to ensure that the banking and financial sector is acting in the best interest of its customers.

This Bill reiterates that the Australian people are the masters of the broader economy. We are not its servants.

I commend the Bill to the Chamber.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.