28 August 2017
Transcript - #2017160, 2017

Doorstop interview, Canberra

SUBJECTS: Government backs APRA CBA inquiry; Turnbull Government’s take-action-now approach to the banks

TREASURER:

The Government welcomes the decisions by APRA to put this new inquiry into place which looks at the broader issues of governance and accountability within CBA. Obviously there are the very specific matters which AUSTRAC will continue to pursue through the courts in relation to the most recent instances and of course there is ASIC’s actions that they are already taking into directors duties and they announced that a few weeks ago. When this news first broke of what had happened at CBA regarding the AUSTRAC investigation, I asked the Chair of the Commonwealth Bank to come and see me and we spoke about a whole range of issues and I made it clear that we would be considering all the options to address this matter and have been working closely with our regulatory agencies since then. We have seen the take action now approach from both ASIC and APRA as should be the case. The Government is taking action now when it comes to banks, whether it is the Banking Executive Accountability Regime (BEAR) which I will be introducing into the Parliament before the end of the year or whether it is the new financial complaints authority which makes sure that Australians can have their cases heard without having to engage an army of lawyers to do so. These are all practical measures that are designed to support Australians in engaging with the banking and financial system and to deal with any bad behaviour or inappropriate behaviour or just bad customer behaviour when it comes to the banks. So, APRA is doing its job as it should. They are taking the take action now approach which the Turnbull Government continues to drive right across government and I think this is a welcome intervention by the regulator.

QUESTION:

Can APRA take any sort of action against the banks, like recommend prosecution or charges?

TREASURER:

Like ASIC, APRA also has powers to take matters forward on civil penalties, they can do that, as ASIC can. If there are any criminal matters, I’m not expecting, well no one has advised me that there are any expectations in that area, but that would obviously involve the DPP.

QUESTION:

What penalties could be applied to the CBA here and does this take the sting out of Bill Shorten’s argument that you need a Royal Commission into banks?

TREASURER:

What this inquiry is about is trying to take a step back. There hasn’t just been one incident here with CBA, there have now been quite a series of incidents and I think that is what has brought APRA forward to look at what are the broader issues here, what are the organisational issues here, what are the corporate governance issues here and so on. I think that is the right thing for them to do, to look at a very specific case with this particular institution and to get behind what some of the issues there might be. So they can deal with it practically. This is a practical inquiry by APRA. It is not a show trial. It isn’t a political witch hunt. It isn’t any sort of political process. They are an independent regulator and I have been pleased to be working with them now over many weeks and well before that on all of the other measures that I have just mentioned to you. This is how the system works. Action is being taken now with the banks, particularly into these more serious issues that we are seeing with the CBA, as should be the case. So, I think, what Labor does on this is just politics. It is not going to get anybody a settlement. It is not going to get anything happening now. It is just going to kick the issue down the road for another three years. The things that a Royal Commission would potentially recommend we are already doing that: increased powers and resources for ASIC – tick, done, swoosh, just do it. The Nike approach - that’s what we are doing with banks. This is another example of that take action now approach from the government.

QUESTION:

Can customers assume that CBA is one-out, is a rogue within the industry and that some of these behaviours aren’t unique to it? In other words, should APRA be looking at others?

TREASURER:

Well APRA has not formed that view at present and I do not have advice before me, particularly in relation to the issues that AUSTRAC have identified, to suggest that practice is more widespread in the other institutions. But I think the great value of this exercise with APRA is to look behind these current events and see what is occurring more broadly within the institution. And I have no doubt that if they identify issues that may require further inquiry in other places then they would form a view to that end. But I think that is very premature, I think to move to that point.

QUESTION:

It is years now though isn’t it, year of breaches by this particular institution and other banking institutions which creates the push for things like the Royal Commission because people are exasperated by them aren’t they?

TREASURER:

I understand the frustration. That is why it is important not to prolong that frustration by going down a path that would see nothing happen for another three years which is what Bill Shorten wants to do. What we are doing is what we have been doing for the last two years and that is taking action and before that time. It was this government that put in place the Financial System Inquiry. It was this government that has responded to that, which has dealt with everything from credit card surcharging to now taking action on banking executive accountability. The regulators are empowered and enforced and resourced to get on and do exactly what Wayne Byers is announcing today. So taking action now is what is needed, that is what we are doing, that is what our regulators clearly understand is their job to do and they are getting on with it.

QUESTION:

APRA are independent, correct?

TREASURER:

Absolutely.

QUESTION:

There is no direction from government?

TREASURER:

No, look we work closely with our regulators. I work closely with the Council of Financial Regulators on everything from what we have seen with the macro prudential control over bank lending in the housing sector to broader regulatory issues like this. They take their own decisions and that is appropriate. But they are in no doubt about the government’s strong resolve to ensure that action is being taken now to address these issues.

QUESTION:

What confidence can the public have that there is a consequence at the end of this investigation, that there is a consequence at the end of this and what can that be?

TREASURER:

Well they have the powers to act and to take proceedings forward if they choose to do that. They are the on the ground cop on the beat regulator in the banking and financial system as ASIC is for companies. Both of those cops on the beat are there and are attending the scene, conducting their investigations and moving the issues forward. In the same way a police officer will turn up at a scene and get on with the job and bring matters forward, that is exactly what APRA and ASIC and indeed AUSTRAC are doing right now. So the evidence is already there to give the confidence that I think you are addressing.

QUESTION:

But to someone at home saying what is going to happen at the end of this, are you saying financial penalties and the possibility of charges being laid against senior management?

TREASURER:

What I am saying is they are going to do the investigation, as a police officer would do at the scene of an incident and then they will take whatever action they need to take to address what they have found. That is their job. I am not going to prejudge the outcomes and I don’t think APRA would prejudge those outcomes either. But they are right to investigate. They are right to turn up at the scene like a police officer would do and actually get on with the job of investigating.

Thanks for your time.