Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

Thank you, Madam Acting Deputy President. As a servant to the people of Queensland and Australia, I proudly ask for the Senate's support for this bill, the Banking Amendment (Deposits) Bill 2020. It's commonly called the 'no bail-in bill' or the 'anti-bail-in bill'. Its purpose is to keep people's money safe and to keep the banking system safe. Let me first explain what is a bailout and what is a bail-in. Bailouts have been used during financial crises when banks get into trouble and are a lifeline of money from taxpayers to banks to keep banks afloat. Governments act as a conduit from taxpayers to corporate banks, even when the banks get into trouble due to their own greed, recklessness or stupidity. In times of profit, it seems, banks are capitalists; and in crises banks are socialists.

However, International Monetary Fund and G20 rules now prevent taxpayers' money being used to save a bank, instead requiring that rescue funds must come from shareholders and from depositors: a bail-in. And here's how it works. Literally, banks steal the money in retail deposit accounts and use that to save themselves. In exchange, depositors get shares in the bank. The shares are then suspended from trading because the bank's shares are worthless pieces of paper and will remain so for many years. Retail deposit accounts are the bank accounts of everyday Australians and small and medium-sized businesses. This is money, taken from these accounts, which people need to pay bills, buy stock, pay the rent and pay staff—gone. This is money a couple is saving to buy their first home—gone. This is money retirees cashed out of superannuation and need to live on, to buy food and clothing and pay bills—gone; gone overnight.

Reserve Bank figures now show that $1 trillion is available to be taken in a bail-in. That's what the Liberal, National and Labor parties defend when opposing my bill. They defend stealing depositors' money. I'll share a letter from a constituent, Peter Thompson, last week :'As a self-funded retiree, I shouldn't be lying awake at night worrying how to safeguard my deposits from bail-in by predatory and profligate banks; however, I am. I have Greek friends who lost most of their savings in the Greek bank bail-in. I don't trust APRA nor the Treasury to protect my interests and certainly don't trust any bank. We need a people's bank now. What can I do to protect my bank deposits? Withdraw cash, which by design is getting harder and harder to do, and take the risk it will be stolen by more obvious thieves? One can't buy property or land with the Australian real estate market in radical downturn. I want my deposits in a bank. Your Banking Amendment (Deposits) Bill is a vote winner. It will give Australians, many of whom have no idea of what bail-in entails, an opportunity to understand and take action to prevent their savings and create confidence in the system.' Thank you very much, Peter. Creating confidence in the banking system is exactly why I have proposed this bill. By the way, the public understand that the government's cash ban bill is designed to force everyday Australians to keep all of their money in the banking system to make a bail-in much more effective. Labor, the Liberals and the Nationals passed the cash ban bill through the House of Representatives and are now terrified of the public and backbench backlash if it enters our Senate.

The next point is that the public understand our real estate prices are the third highest in the world. The public understand that the government's COVID restrictions are destroying small and medium businesses and the ability of those business owners and their staff to service their mortgages, loans and credit card debts. In fact, there is sleight of hand going on here. A handful of large retail businesses, telcos and internet based companies are doing better than ever, while hundreds of thousands of small and medium businesses are doing much, much worse. The effect on the economy of the government's COVID restrictions is much worse than the headline figures, yet state governments recently doubled down with more lockdowns, more restrictions, more destruction of wealth and more unemployment amongst small and medium businesses. So the public are responding by removing cash from the banking system at an alarming rate—$20 billion in notes have gone missing in calendar year 2020. Cash is being stashed under beds. It is being taken out of banks, out of the system, and stashed under beds.

My bill is an opportunity to restore confidence in the banking sector. It is an opportunity to attract deposits from other countries where bank deposits are less secure than ours. We could be a safe haven for legal investments in our banking sector, money that for once is not coming from the taxpayer. Why shut that down and make banks even more reliant on the government for funding? What a missed opportunity that will be for our banks and for their customers. The Liberal, National and Labor parties now have a chance, though, to stand up for everyday Australians and to protect bank deposits from being bailed in. The response from these tired old parties is denial. We are told that this bill is not necessary. We are told that the law does not allow for a bail-in. I ask all Australians to listen more closely. Listen for their proof. Listen: there is none. There's no legal opinion. There's nothing but bland assurances from self-interested public servants hoping that constant repetition will fool the public.

Here's my argument: the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 that was passed in the dead of night, with just seven senators present, uses weasel words to hide the reality. The wording does allow for the banking regulator, APRA, to instruct the banks to bail in retail deposit accounts. The protections that the tired old parties are relying on for the supposed opposite case are contained not in the crisis resolution powers act but in the Banking Act. That is what they're relying on. Their argument is a nonsense, because the emergency provisions powers in the crisis resolution powers act override the everyday protections in the Banking Act. That's why the government has an emergency powers act—to provide extra powers in an emergency.

This is not just my opinion; it's the International Monetary Fund's opinion. The IMF said that the new 'catch-all' directions powers in the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 provide APRA with the flexibility to make directions to the banks 'that are not contemplated by the other kinds of general directions listed in the Banking Act'. That's it. It went on to say that APRA's direction powers are 'a key element in the resolution process' for a distressed bank and that APRA could order a bank to recapitalise using the funds of unsecured creditors. The IMF went on to define unsecured creditors as shareholders and retail depositors.

Liberal MP Tim Wilson, Chair of the House Standing Committee on Economics, has admitted the crisis resolution powers act does allow for a bail-in. Liberal senator Amanda Stoker in a letter to a constituent admitted that legislation allows for a bail-in. Yet their party bosses say the complete opposite. Why would they do that? The answer, yet again, is: because of our international obligations. The G20 and the IMF have dictated that taxpayers' money can't be used to rescue a bank. The tired old parties know that letting unelected bureaucrats in New York, Brussels and Geneva tell Australians what to do in a crisis does not pass the pub test, so the tired old parties hide the facts and contradict reality using weasel words. It's instructional to note that New Zealand's response to the same IMF and G20 instructions is to do the opposite of what our government has done. The Kiwis dutifully wrote their bail-in laws and made them honest and transparent. If a bank fails, it closes, pays off its debts using depositor funds and then reopens the next day. Depositors can then access what remains of their money, if there is any. I am not suggesting that the New Zealand model is better. More honest? Yes. Better? No.

There is a simple solution for bank failures. When a bank fails, the government could issue bonds. Currently we're offering just one per cent interest on bonds, so it's not a costly option. We would then use that money to buy shares in the failing bank. That injects enough capital for the bank to survive. We'd then invest those shares with a future fund, who pay that small interest payment on the bonds. In a few years those shares will be worth money again and the future fund can sell them back into the market in an orderly fashion. In this simple One Nation bank survival plan, taxpayers' money would not be used to save the bank, so our IMF and G20 masters should be pleased. Nobody in our process loses money. Depositors keep their cash. Banks keep trading. Mum-and-dad shareholders retain the value of their shares over the medium term.

What is the Labor and LNP track record on corporate bailouts? Both gave foreign car companies billions and then watched them shut up shop as soon as the money tap was turned off. If we'd been asking for shares for that money, we would now own the car company and we would still have a car-manufacturing sector. We would still have all those wonderful breadwinner jobs for workers. Prime Minister Gillard gave ABC child care $120 million, not in exchange for shares; it was another gift from taxpayers. If we'd asked for shares in ABC child care in return for the bailout, those shares would be worth $250 million today—double what Julia Gillard, as Prime Minister, gave them. Our response to a bank failure should not be, 'Go and steal it from customers.' Our response should be to use capitalism to fix crony capitalism.

Labor have a lot to say about their Financial Claims Scheme guarantee. The Financial Claims Scheme guarantee will advance up to $20 billion per bank to protect deposits if a bank fails. Let's take a closer look at the Financial Claims Scheme guarantee. The vast majority of the $1 trillion in retail deposit accounts is held by the big four banks, and $20 billion times four is only $80 billion, so the Financial Claims Scheme guarantee will save less than 10 per cent of bank deposits. The Financial Claims Scheme guarantee is not active and is not funded. There's no money sitting there ready to go—not one cent. Should a bank fail, the Treasurer must issue a notice to activate the scheme. Yet the Labor scheme uses taxpayer money to bail out banks, so the Treasurer will not issue the notice, because the notice would breach IMF orders.

In the unlikely event of the Financial Claims Scheme guarantee being activated, there's a second problem that Labor never discusses. Once the Financial Claims Scheme guarantee is activated, APRA must liquidate the bank to get taxpayers' money back. How much does anyone think will be available to retail depositors if the bank is liquidated? And how long will taxpayers have to wait to get their money back from the liquidator? The Financial Claims Scheme guarantee is worse than a con job. It will make things worse.

Earlier, I said that once a bank fails, whether that failure is public or known only to the regulator, the Financial Claims Scheme guarantee can be activated if the Treasurer so chooses. The whole point of a bail-in is to prevent a bank failing. This means the bail-in can only come first and will come first. Then, if the bail-in doesn't work, the Financial Claims Scheme guarantee is triggered and 10 per cent of bank deposits are saved and the bank is liquidated. This is what the Liberals, Nationals and Labor are relying on to falsely tell everyday Australians that our money is safe. Yet the reality is that it's not safe. Following the dictates of unelected globalist masters yet again is more important to them than looking out for the interests of everyday Australians.

The government has advanced a criticism of my bill that the definition of 'retail deposit account' introduces a different definition than is contained elsewhere in the Banking Act. This argument fails because the only place the phrase 'retail deposit account' appears in the Banking Act is in my amendment. We did that deliberately so as not to interfere with the rest of the act. Criticism dismissed!—but questions about the government's competence and level of integrity asked.

In conclusion, at no time has the government, the Treasurer or APRA actually said they will not order a bail-in. These government agencies duck the question and say, 'APRA doesn't have the power'. Well, my bill clears that up. My bill adds one clause to the Banking Act which simply says that APRA does not have the power to order a bail-in. No other powers are affected—none! Passing my bill ensures that everyone will read it the same way. Fellow senators: let Australians know that their money is safe in a bank. Let Australians know that there's no need to stuff cash under the bed. Even the Australian Banking Association said in its submission that if there's any confusion about what the law actually says then consider passing my bill. What a great idea! Let's pass this bill to keep people's money safe. Let's pass this bill to keep people's confidence in the banking system. But, above all, let's pass this bill to keep people's money safe.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I too rise to speak on the Banking Amendment (Deposits) Bill 2020—a private senator's bill introduced by the One Nation party.

At the outset I'll start with the area where we can agree, and that is that our banking system is vital to a strongly functioning economy and that confidence in our banking system is vitally important. But I think the history of the last few decades—certainly, going back to well before my memory—is that we do have a strong and well-functioning banking system in Australia. In fact, I would contend that the Australian banking system has been the envy of much of the world over a sustained period of time in terms of its stability and in providing a service to the Australian people. Personally, I would like to see much more competition in our banking sector but I think that, overall, and certainly within my lifetime, we've seen a banking system that has been very safe and secure, and it has underpinned a very strongly performing Australian economy.

The economic shock brought on by the current pandemic situation has been a significant and fundamental economic shock which has reverberated right around the world. We've seen many jurisdictions with significant recessions and significant declines in GDP—some in the double digits. And we've seen not just the Australian banking system but also the international banking system stand up remarkably well. The pandemic was, in a sense, a left-field event. It wasn't caused by an underlying structural problem within the financial system as, for example, the 2008-09 global financial crisis certainly was—so there are different drivers. But in the face of a significant economic shock in the last 12 months we've seen a very strong, reliable and well-trusted banking system.

Senator Roberts—through you, Acting Deputy President Polley—some Australians do choose to keep a store of value in cash. I think that linking that to a fundamental distrust of our banking system is simply a misunderstanding of why those Australians choose to do that. Certainly, it's a gross simplification of the reason some Australians choose to keep a store of value in cash.

The central premise of this bill is that there is an underlying ambiguity introduced into the banking act by the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018. In this understanding of the crisis powers act, the conversion and write-off of normal deposit accounts in the event of a banking failure could be allowed. This is what people mean when they talk about a bail-in. In part, this is based on section 11CAA of the crisis resolution act, which added a number of definitions relating to the conversion and write-off provisions, including the following:

… conversion and write - off provisions means the provisions of the prudential standards that relate to the conversion or writing off of:

(a) Additional Tier 1 and Tier 2 capital; or

(b) any other instrument.

It is contended that the 'any other instrument' phrase is open-ended and creates a bail-in opportunity. In looking at this bill, the Senate Economics Legislation Committee took extensive evidence from members of the general public who expressed the views that Senator Roberts expressed here today, but we also took evidence from experts, including the RBA, Treasury and APRA. Senator Roberts spent some time dismissing their views, but we do have a trusted banking system. We have a number of independent regulators within the system, and I think we need to consider their words very strongly when we are talking about making changes to legislation in this area, and their evidence was very clear that there is no ambiguity in this space in need of rectification. Under current laws and regulations, it is not possible for APRA to require banks to bail in deposit accounts. The Reserve Bank, APRA and Treasury all agree that the Banking Act does not imply that losses could be imposed on deposit holders or give APRA any additional powers that could be used to the detriment of retail depositors.

Depositors are in fact safeguarded under a range of protections. There is the Financial Claims Scheme, which the Treasurer may activate in the very unlikely event that there is a bank failure. Upon activation, APRA provides depositors with access to their deposits, up to a $250,000 cap, within seven days. This covers 99 per cent of deposit accounts in full and around 80 per cent of household deposits by value. We also have the depositor preference system, which applies to deposits above the Financial Claims Scheme cap. It means that in the event of a bank failure—again, a very unlikely event—the claims of depositors rank above those of all equity holders and creditors after the government has been reimbursed for any amounts paid out under the Financial Claims Scheme. There are also, of course, numerous layers of prudential regulation and interventions APRA can make to resolve financial institutions in distress, such as recapitalisation, statutory management and transfer powers.

I wish to go into a bit more detail on this issue of 'any other instrument', as set out in the crisis resolution powers bill. As a matter of law, the reference to 'any other instrument' in that act, under subdivision B, conversion and write-off provisions, cannot be interpreted to include bank deposits for the following reasons. It refers to provisions of prudential standards relating to the conversion or writing off. APRA's prudential standards do not require such provisions to be included in bank deposits. The prudential framework cannot be altered to include bank deposits, because APRA is constrained by the objects of the Banking Act and any such attempt would be found to be invalid. Principles of statutory interpretation would require a court to view the general words to be limited by the specific reference to additional tier 1 and tier 2 capital, and only instruments of a similar nature would fall within the general definition. Retail deposits are fundamentally different to additional tier 1 and tier 2 capital.

I wish to quote from a letter from APRA on this issue—for those members of the public who are listening to this debate—to demonstrate the level of confidence that they express in their position and the position of the government on this issue:

… it might be helpful to clarify a recent public misconception about the interaction between APRA's twin objectives – to protect depositors and financial system stability. Following my previous response to this committee of 15 July 2020, APRA's financial system stability objective has been characterised as an alternative to depositor protection that could be used to implement measures contrary to depositor protection (such as bail-in of deposits). This characterisation is incorrect. As the Banking Act 1959 (Banking Act) makes clear, APRA's twin objectives are complementary. This is evident when considering 'depositor bail-in'. A 'bail-in of deposits' would offend both APRA's depositor protection objective and its financial stability objective. A bail-in of deposits would not only cause depositors at the 'bailed-in' institution to lose a portion of their deposit funds, it would reduce the confidence of depositors across the banking system thereby reducing financial system stability. It would also starve authorised deposit-taking institutions of the stable deposit funding on which they rely to provide credit to the economy. This is why APRA has described depositor protection as a paramount objective—it lies at the heart of both of our statutory objectives under the Banking Act. As such, APRA has never sought, nor supports, a 'bail-in of deposits' power.

That's a very clear statement of principle from the regulator, and I think makes it very clear that there is no conflict within the Banking Act. In fact, the twin purposes of the Banking Act are complementary. APRA would never act in this way because it would cause the depositors at the bailed-in institution to lose a portion of their deposit funds. On the other hand it would also reduce financial system stability because it would undermine confidence in the sector and it would starve those same institutions of the deposit funding they use to provide credit within the economy.

Australia has not legislated for the bail-in of deposit accounts because it is contrary to APRA's purpose and objectives. The objectives of the Financial Stability Board bail-in reforms have been achieved without needing to do so. Instead of legislating for deposit account bail-in, APRA requires authorised deposit taking institutions to maintain higher levels of equity than most peer jurisdictions and hold additional loss absorbing capacity, which uses contractual conversion provisions in financial instruments that will convert into equity at a specific trigger point if an entity gets into financial difficulty. These are known as the additional tier 1 and tier 2 capital which can be bailed in or converted.

An additional matter is that terms and conditions of deposit accounts cannot be changed to allow bail-in. Approved deposit-taking institutions are prevented from unilaterally changing terms and conditions for customer deposits to facilitate a conversion or write-off because it would be inconsistent with unfair contract terms legislation under the ASIC Act.

We see there that for a variety of reasons this legislation is unnecessary. It seeks to solve a problem that does not exist. As he finished up there Senator Roberts said, 'If there's nothing to fix then why not pass the legislation?' We shouldn't, in this place, pass legislation to fix a problem that does not exist. I think the very clear words that I have quoted today from APRA, from the Treasury, from what we heard in the Senate Economics Legislation Committee and from the Reserve Bank of Australia all indicate that this is a solution for a problem that does not need fixing and, in fact, does not exist.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) Share this | Link to this | Hansard source

The Banking Amendment (Deposits) Bill 2020 amends the Banking Act to ensure that bank deposits cannot be converted to shares by the holding bank—a process that has become known as a bail-in. It would further prevent Commonwealth laws from authorising bail-ins of deposit accounts. It's quite a technical bill and it's unusual for technical amendments to banking legislation to become matters of public interest. It's true that both this bill and the issue that it seeks to deal with are probably not on the radar of most ordinary Australians. But it's impossible to speak about this bill without noting the extraordinary interest in it by a section of the Australian community. Like most of my colleagues, my office has received a significant volume of calls about bail-ins from people who are highly motivated an engaged about this issue. We have sometimes heard from individuals four or five times over the course of the past few years. Regardless of the issue, it is always great to see community members engaging with the work of the parliament—whether it is signing a petition, calling their MP or making a submission to an inquiry. I would encourage anyone who has taken an interest in this issue to continue to engage with these and the other issues that come before this place. We benefit from an engaged and interested citizenry.

But, as I began by noting, it is unusual for a technical banking issue to receive this much attention. I think it is due in large part to the Morrison government's failure to reassure people about the safety of their retirement savings. The government's mishandling of its own communications about this and other banking related matters has given Australians unnecessary concern about the safety of their savings. It's worth considering the history of this issue. Concerns about bail-ins came to prominence during the global financial crisis. The events in Greece deeply unsettled many people, and Australians wanted to know that their life savings would not be used to underwrite mistakes made by financial institutions.

Australia's financial system made it through the GFC largely unscathed, thanks in no small part to the efforts of the Rudd-Gillard government, efforts that often were not supported by those opposite. And there were no bail-ins in Australia. So why are we talking about it now, more than a decade later? The current set of concerns about bail-ins seems to have come following the introduction of the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017. That legislation gave APRA the power to allow financial instruments known as hybrid securities.

I think the government mishandled its own legislation in the debate about this legislation. It failed to properly engage with the concerns that many Australians had about the operation of that bill, and I think that was a mistake. People are of course justified in wanting to have confidence in the banking system and in the security of their deposits. The callers to my office about this issue are not wealthy people. Many are Australians with modest backgrounds who have worked hard and lived careful lives so they can enjoy some measure of economic security as they get older. They are entitled to expect that the government provide them with that confidence. Unfortunately, the government's own actions mean that many Australians do not trust them to do the right thing when it comes to the banking sector and retirement income policy.

People can be forgiven for being suspicious of the Morrison government's approach to the banking sector given its history on the issue. The government voted against the establishment of a banking royal commission not just once but a staggering 26 times. This was while Mr Morrison was the Treasurer and nominally responsible for Australia's banking and financial system. There has still not been a compelling or credible explanation proffered by those opposite for their opposition to the establishment of this royal commission, and it is certainly not justifiable in light of what came out during the course of the commission. People across the country told devastating stories about mistreatment by the banks causing physical, psychological, social and economic harm. The evidence provided to the commission was overwhelming and Commissioner Hayne noted that members of the public submitted more than 10,000 complaints about financial services entities by using the committee's webform. In addition, there were many thousands of telephone calls and emails to the office of the royal commission. It's understandable, then, that people may be suspicious of this government's bona fides on banking policy given the length they went to in this parliament to prevent this commission from being established.

What have they done since the royal commission ended and handed down its report? After receiving the banking royal commission's final report the Prime Minister and Treasurer Frydenberg took six months to release an implementation timetable. One year after the report was on their desk, the government had completed just six of the 76 recommendations made by Commissioner Hayne. Labor was disappointed by the government's decision to further delay implementation of the banking royal commission's recommendations. These are important reforms and they should have been prioritised by this government.

Not only has the government dragged its feet in implementing the recommendations of the royal commission; it has now broken a promise. Responsible lending laws are a key part of the protection for consumers in our financial system. They help ensure that people are not taken advantage of by predatory lenders and saddled with debt they cannot possibly repay. Retaining responsible lending laws in their current form was the royal commission's first recommendation. The government agreed to this recommendation, and Commissioner Hayne himself described them in his report as critical in ensuring good-faith negotiations on loan products between banks and customers.

The Morrison government has announced its intention to repeal responsible lending provisions. Let's be clear: there is no good evidence that repealing responsible lending provisions will help boost our economy. There is plenty of evidence that this will harm vulnerable consumers. Financial Counselling Australia are on the record as saying that removing responsible lending obligations will free banks up to aggressively push credit onto their customers. And they're not alone in having that concern. Recently, more than 200 community groups and financial experts wrote to parliamentarians arguing against the repeal of responsible lending provisions. So we have Mr Morrison opposing the royal commission as Treasurer, delaying implementation of the recommendations as Prime Minister, and now backflipping and removing key consumer protections, having been re-elected. You can understand why people might be suspicious of the Morrison government's banking policies.

You can also be forgiven for being suspicious about the Morrison government's approach to retirement savings, given its history on the issue. Australia's retirement system is often described as having three pillars: superannuation, the pension and independent savings. What has this government done to each? The coalition has a long track record of undermining Australia's superannuation system. In parliament back in September 1995, then backbencher Mr Abbott described compulsory superannuation as 'one of the biggest con jobs', and the coalition is still at war with the superannuation industry.

Part of the government's response to the coronavirus induced recession was to encourage workers to withdraw from their superannuation. This has come at a real cost to young workers. Workers aged 30 who withdrew $20,000 from their superannuation could be $69,000 worse off in retirement, and the consequences for younger Australians could be much, much greater. And for what? Analysis suggests that large amounts of this super was spent on discretionary spending. At the same time, the government has been suggesting that it may not proceed with the legislated increases to compulsory superannuation. So we have this government telling people to run down their super while at the same time backing away from legislated increases to the super rate that would help restore and rebuild those balances for a secure retirement.

What about the second pillar of the retirement system—the pension? In the 2014 budget, the coalition government announced changes to the pension, with the pension age to be raised to 70. There are also changes and cuts to supplements, and since then pensioners have had to fight for the government to use fair deeming rates to account for the value of their other assets. So we've had this government reducing eligibility for the pension and proposing to cut the rates for those who remain on it.

Given the government's assault on two of the pillars of Australia's retirement system, it is not really surprising that people might be suspicious of their intentions in relation to the third: independent savings. As I said earlier, there are countless Australians who have come from modest backgrounds and worked hard and lived careful lives so that they can enjoy a measure of economic security as they get older, and they do deserve confidence that the banking and financial system will not take advantage of them.

Unfortunately, the bill before us today is not the solution to these concerns. There are real and credible concerns that this bill may undermine existing banking regulations. Australian banks are supported by a strong system of prudential and other regulation that should avoid the need for any such measure outlined in this bill. APRA and Treasury have stated it is not possible, under current legislation, for banks to bail in deposit accounts. The legislative certainty on that question already exists. Every bank deposit in Australia is protected from bank failure by the Financial Claims Scheme, which was established by Labor in 2008. This means that every deposit in a bank, credit union or building society is guaranteed up to a value of $250,000 per account holder. This scheme means that account holders are protected against bank failure, even in the worst-case scenario. APRA regularly conducts stress testing of banks to ensure that they are ready for a potential crisis.

Treasury has also expressed concerns that the bill introduces a definition of 'deposit account' which is not then used consistently in potentially relevant places throughout the Banking Act—for instance, in the depositor priority provisions in section 13A. This would introduce multiple definitions to capture a single concept in the Banking Act, which would risk introducing uncertainty regarding the interpretation of the Banking Act. In addition to this, the measures outlined in the bill have not been a feature of previous responses to financial crises in any major country.

The government does need to do a better job of responding to people's financial concerns. Our financial system depends on confidence, and the measure of interest in this bill shows that a portion of the Australian community does not have confidence that their savings will be protected. It's understandable that people are suspicious, given this government's track record on retirement policy and banking policy, and it's not enough to say that things are just fine. The government needs to show that it has ordinary Australians' financial futures as its core priority.

Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

I rise to address this bill, the Banking Amendment (Deposits) Bill 2020, as well. In doing so, I think it's always good to reflect upon what my good friend Mr Paul Keating has said when he has said that banking is the artery of the economy. It is very important that we get banking and financial sector policy right, because, ultimately, the flow of capital and credit into Australian businesses is something which underpins our prosperity.

Of course you can't have a fair society unless you have an economy upon which to build it. Over the long run of history, our contribution to banking and financial sector policy on this side of the chamber is absolutely assured. The Menzies government established the Reserve Bank. This Banking Act we're referring to today was an act of the Menzies government. And, in the years beyond the Menzies period, there were the financial system inquiries that led to, in a large degree, the modern banking and financial sector architecture in Australia. They started with the Campbell inquiry, commissioned by John Howard and Malcolm Fraser. A lot of the recommendations from that inquiry, to be fair, were implemented by the Hawke government, to their great historical credit. The entry of foreign banks and the like ensured that there was more competition in the eighties, and then, fast forwarding into the nineties, there was the Wallis inquiry. The Wallis inquiry, which was commissioned by Peter Costello and John Howard, looked at the standing of the financial sector in the mid-nineties. It recommended the creation of APRA and ASIC to form the twin-peaks regulatory framework that you now see in Australia.

We had the financial crisis in 2008-09, and that was effectively a stress test for our banks and our financial sector. I have to say, just as we have seen in this coronavirus recession, that Australia's institutions held up very well. That is partly because of the twin peaks authority, or the breakdown of responsibilities between a conduct regulator and a prudential regulator. It is also that APRA was established as a standalone prudential regulator, a regulator that was to focus on risk and focus on governance. Also, as my colleague Senator Brockman mentioned, it is a regulator which really has two key objectives. One objective is to assure financial stability; the other objective is to protect depositors and policyholders. That really takes us to the core of this bill today and reminds us again of what APRA is there to do every day as the prudential regulator.

APRA administers the Financial Claims Scheme, and we all recall the way that the Financial Claims Scheme was legislated by the Rudd government. It was, for a time, the Rudd government's policy that there would be an unlimited bank guarantee. That caused enormous concern in financial markets and led to the freezing of non-bank investments virtually overnight, because you had a panicked response from an inexperienced person who claimed to be providing the world's biggest deposit guarantee—unlimited. That was then scaled back to $1 million, because the huge financial disruption that had caused to cash management trusts and cash-like investments was known. Ultimately, the Financial Claims Scheme has been scaled to a quarter of a million dollars, and that is limited to an institution. The Financial Claims Scheme exists in case there is a major dislocation and a failure or a partial failure of an ADI or a bank. There is a very important seal that can be used by ADIs, which allows them to assure Australians that their money is secure.

I don't doubt the sincerity of Senator Roberts and others who have brought forward this bill today. They have said that there is a genuine concern in the Australian community about whether or not people's money is safe. I understand that, and one thing that I think we can do better in the future is ensure that people are aware that we have the Financial Claims Scheme to protect people's money. The seal, which can be used by banks, probably should be more widely used. Currently, this is not compulsory; a bank doesn't have to use a seal, because it is voluntary. But, if people saw that their bank had the Commonwealth coat of arms on the seal, they would perhaps have more confidence that their deposits would not be affected should there be a major financial dislocation and a failure of financial institutions.

As I said, the financial crisis was a stress test for our institutions, and none of our major financial institutions failed. Yes, there was a retail deposit guarantee, which, as I said, was shambolically announced by the Rudd government as an unlimited guarantee but ultimately landed at $250,000. There was also a wholesale funding guarantee, which I guess provided more money for banks that were struggling to secure credit on the wholesale funding markets. But the financial crisis tested these institutions and they stood up pretty well, and during the COVID crisis we've seen a similar pattern being repeated. On one side you've got depositor protection, which is part of APRA's mandate and comes to life through the Financial Claims Scheme, and on the other side you've got financial stability and APRA deploying capital adequacy requirements. APRA said in March this year:

Over the past decade, the Australian banking system has built up substantial capital buffers. The highest quality form of capital, Common Equity Tier 1 … reached $235 billion at the end of 2019. As a result, banks are typically maintaining capital levels well above minimum regulatory requirements.

For the four majors, APRA said that you've got a common equity tier ratio of more than 10½ per cent of risk weighed assets, which is, by global standards, quite a high level of capital. As I said, on one side you've got the claims scheme and on the other side you've got very strong capital adequacy requirements for banks. Of course, I should reflect on APRA. I think APRA has been a good banking regulator. The fact that it has presided over multiple crises in the finance sector without a banking calamity, in the form of a run on the banks or a major dent, is a good thing.

There was, of course, a royal commission into the banks a couple of years ago. That profiled, for anyone to see, the foul and disgusting behaviour, particularly in the wealth management sector where we repeatedly saw super funds putting the interests of shareholders ahead of the interests of their members. A large part of the government's plan to adopt the Hayne royal commission recommendations really does go to tidying up a lot of the cowboy behaviour that we saw in that wealth management sector.

Sue Lines (WA, Deputy-President) Share this | Link to this | Hansard source

Senator Gallacher, a point of order?

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Bragg started off with a statement about his good friend Paul Keating, and he's now has gone on to mire the superannuation industry with untruths. I would suggest that he's misleading the Senate—

Sue Lines (WA, Deputy-President) Share this | Link to this | Hansard source

Thank you Senator Gallacher. They are debating points. Please resume your seat. Please resume your seat. Continue, Senator Bragg.

Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

Yes, APRA has done a good job on banking stability, but I don't think APRA has done a good job in superannuation. It is disgusting, the scale and degree of the waste of money that you see in the superannuation industry. APRA has proven, at successive Senate estimates, that it won't enforce the laws that this parliament gave it to enforce. There is a law called a 'sole purpose test', which means that the super funds are only supposed to spend money on their members' retirement outcomes. But they're setting up boondoggle propaganda outfits like The New Daily and they're putting Greg Combet's head on TV, spending millions and millions of dollars advertising during football grand finals and the like. All of this is vanity and power when their job is to actually be there for their members. Their job is not to run an agenda for the Labor Party, or the trade unions, or the banks or any other interests. The job of super trustees is to work for the workers of Australia who put their money into these funds and who have been treated very poorly for 30 years. So, yes, APRA has done a good job on banking, but APRA has done a terrible job when it comes to enforcing the superannuation laws.

It's very important that this chamber, when it considers the budget reforms that our government is pursuing, does give APRA more power, because they're not using the fiduciary duty they already have to protect members' savings. We're now going to give them a best financial interest test so that the super fund members know that their money is not going to be wasted on stupid things like newspapers which are used to attack political opponents or opponents of the super industry, or endless vain advertising, as we've seen with Greg Combet putting his own face on TV, not to advertise the product but to advertise politics and a brand. Who can think of any other lobby group that has spent $40 million advertising, as we've seen in the past few months? It is really disgusting. It shows the largesse of the super industry comes about because it is compulsory, and because for 30 years they've opened the door and money has just fallen in. It's not good enough. I look forward to APRA becoming a much better protector of members' savings once this parliament gives it better powers.

Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

I move:

That the question be now put.

Sue Lines (WA, Deputy-President) Share this | Link to this | Hansard source

The question is that the Banking Amendment (Deposits) Bill 2020, as moved by Senator Roberts, be agreed to.