Day 422: 'Still plenty of time for the supervisory wheels to turn'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 422.
Today in summary: The Centre Alliance moves to end grandfathered commissions; the House of Representatives Standing Committee on Economics Review of the Four Major Banks (Fourth Report) is released; Financial Services Council chief executive Sally Loane urges politicians not to rush legislation to implement the recommendations of the banking royal commission; and former treasurer Peter Costello wants a new government-backed superannuation body to handle default savings.
-- Alex
@AlexESampson
Current banker panic level: 🥴😬
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1. Senator Rex Patrick, a member of Xenophon successor party Centre Alliance, was unable this afternoon to introduce an amendment to a Treasury Bill (Treasury Laws Amendment (2018 Measures No.2) Bill 2018) to end grandfathered commissions by July 1, 2020, ahead of the government's planned cut-off date of January 2021. Late in the afternoon Senator Patrick’s office was still negotiating with the Treasury ahead of introducing the amendment, telling Australian Banking Daily that rebates enforced under the amendment remained the most complicated element to unravel.
“The government has suggested some improvements and we're always open to improvements. But we want to see a result this week,” Senator Patrick told Australian Banking Daily.
Read more here.
Meanwhile, the government has tabled an amendment which acts on two recommendations (3.6 and 3.7) in Commissioner Hayne’s final report, enhancing accountability of superannuation funds and strengthening protections for consumers.
2. The House of Representatives Standing Committee on Economics Review of the Four Major Banks (Fourth Report) was tabled today. The report points to the banking royal commission final report, which “revealed shocking examples of behaviour by Australia’s four major banks”, with conduct that has been “contrary to law and has fallen well below community expectations”. A key recommendation was for the government to give bank victims who had not been called to give evidence to the banking royal commission an opportunity to tell their stories to the commission, with hearings taking place in city and regional locations.
“The messages for the four major banks should already be clear. The pursuit of profit at the expense of their customers’ best interests and basic community standards like honesty has been the root cause of widespread misconduct and systemic failings. As a consequence of their own actions, the banks now face a considerable challenge in rebuilding the community’s trust and confidence,” committee chair Tim Wilson writes in the report’s forward.
The Greens questioned the chair’s report, saying it “fails to make any recommendations for reform, despite all of the evidence considered during the fourth round of hearings”.
“The Greens are concerned that there is a gulf developing between the rhetoric about reforming the financial sector, and the commitment to actually reforming the financial sector. Bank bashing is not an end unto itself. Policy reform is the goal,” the Greens wrote in their additional comments for the report.
The Greens also called for competition watchdog the ACCC to be “reinstated as the conduct regulator with responsibility for ensuring consumer protection and competition within savings and loans banking, superannuation and insurance”, including transferring powers currently vested with ASIC and APRA to the ACCC.
3. Financial Services Council chief executive Sally Loane says legislation to implement the recommendations of the banking royal commission “should be treated with the same diligence and rigor as any other new bills to be brought before parliament”. Speaking in Canberra, Loane said the FSC understood the appetite for immediate reform and was “broadly supportive of the commission's recommendations”.
"With the release of the final report, there is a real and justifiable desire to get on with the job of strengthening and improving our financial system. There are already several important superannuation reform bills languishing in Parliament that have not yet been passed into law. The FSC would like these passed without delay," Loane said.
4. Former treasurer Peter Costello wants a new government-backed superannuation body to handle default savings from members, but did not offer up the Future Fund, which he chairs.
“The Future Fund is a sovereign wealth fund. It is not open to the public. It is a not a superannuation fund. It doesn’t aspire to become a superannuation fund. Let me be very clear about that,” Costello said.
“The idea of a public default fund is quite separate.”
Instead, Costello insists a new government-backed scheme would complement Hayne’s recommendation for new job entrants to have just one default superannuation account throughout their careers, ending unintended multiple accounts that are eroded over time by fees.
Today’s burn prize: ASIC commissioner Cathie Armour
🔥🔥🔥
“Dishonest use of position in the financial services industry, in order to gain a personal advantage, threatens the integrity of our financial markets.”
Armour was responding to news former Deutsche Bank trader Andrew Donaldson had been handed a suspended 18-month prison term after he pleaded guilty to falsifying entries in the bank’s internal financial records and systems.
The Commentariat
In The Australian today John Daley and Brendan Coates address whether federal parliament has the resolve to start fixing the “outrageous rorts in superannuation”, including defaulted insurance, unintended multiple accounts and opaque fees which erode “Australians’ super balances by A$1.9 billion a year”. They lament the slow progress of the Protecting Your Superannuation Package Bill, which has stalled in the Senate since late last year.
“The industry’s key arguments against it focus on the small numbers of people who might lose coverage they need, rather than the millions more who will no longer pay for coverage they don’t need.”
The Australian’s business correspondent Richard Gluyas writes that 15 to 20 years of crises should have prompted a serious “Commonwealth Bank-like prudential inquiry” into NAB’s bruised operations and that despite historic inaction from regulators, there is “still plenty of time for the supervisory wheels to turn”.
“Any prudential inquiry could also take a close look at the A$1bn burnt on US subprime securities in 2008, and exhume the bones of NAB’s Next Generation IT transformation fiasco, which cost A$1.5bn but delivered little more than a revamped general ledger.”
Economist and company director Judith Sloan writes in The Australian that it cost A$13 million per recommendation for the 76 recommendations from Commissioner Hayne final report on the banking royal commission, and questions whether this is justified. Sloan argues “the value of some of the recommendations is questionable”.
“Take recommendation 5.6: ‘All financial service entities must assess their culture and governances, identify problems and deal with them.’”
“What that guff means is anyone’s guess, although the consultants will now be booking the additional revenue of the required culture assessment assignments.”
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