29 August 2017
Transcript - #2017164, 2017

Interview with Ben Fordham, 2GB

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

BEN FORDHAM:

Welcome to the program the Federal Treasurer Scott Morrison, Treasurer good afternoon.

TREASURER:

G’day Ben. Sydney’s Number One. First Ninja Warrior, now this. Well done!

FORDHAM:

Well, I am very, very pleased. I thought you would be too busy to take any notice of such things Treasurer but you are very kind. Now, Listen, you are telling me that the banking bosses are going to be scared this afternoon, thinking ‘oh no, Scott Morrison is going to come along and knock a few hundred grand off my pay packet when I am taking home $18 million a year?’

TREASURER:

Well, we are talking about a lot more than that. What this means is that 40 per cent of a senior banking executive’s what they call ‘variable remuneration’, that is what they have in all of their bonuses which is largely where most of their remuneration is loaded up, that can all be clawed back – 40 per cent of it if they do the wrong thing and 60 per cent for CEOs under these rules. Banks that don’t follow these rules and don’t report this sort of behaviour and don’t keep things up to date they can face fines of up to $200 million and a key one in all of this is that these senior banking executives have to be registered and keep their registration. So, if they are serial offenders or have serious behaviour issues surrounding what they are doing, well, they can, as you said in your introduction, be run out of our banking and financial system, be deregistered and unable to work in any of those roles in our banking and financial system. So, they are very tough rules and laws, but I think they are appropriate. We have regulations and accountabilities for doctors, we have them for electricians, we have them for real estate agents, financial planners – they have all got accountabilities and this regime ensures that this applies to senior banking executives too.

FORDHAM:

Labor’s position is, let’s have a Royal Commission into the Banks. You say no but your actions since with the Bank Levy and now this crackdown indicates Labor was on the money?

TREASURER:

No, they are not doing anything. They are proposing to have a hearing. What we have done from over two years ago, we have increased the powers of ASIC, we have given them more resources to investigate the banks, we have now legislating to set up the new Financial Complaints Authority which means you can get your cases heard and dealt with and get settlements which are binding, from the banks and not have to employ an army of lawyers to do so, the Banking Executive Accountability Regime which I have talked about, we announced in the Budget some time ago. So, we are just doing it now Ben. We are just taking action now. Bill Shorten doesn’t have a plan to fix the banks. He just has a plan to show boat.

FORDHAM:

You go through the list of salaries here, the CBA, Ian Narev $12.3 million. Andrew Thorburn at the NAB $6.7 million. Shayne Elliott at ANZ $5.07 million. Westpac Brian Hartzer $6.7 million. Macquarie Bank, Nicholas Moore $18.7 million a year. That is so far out of touch with reality. I was going to ask you what you make of those salaries but then again it is a bit of a waste of time isn’t. We can say what we like about it but the market is going to dictate those salaries. How much of that cash could be taken away if banking bosses have been proven to do the wrong thing?

TREASURER:

Well, millions. Millions and millions. Depending on how it is structured. For a CEO it’s 60 per cent of their at risk salary. So, that can be millions and millions and it is not just the CEOs either Ben. As you know it is the head of risk and other senior executives through the system on compliance and so on. They get paid millions too. It is not just the CEO. So, the market will set what these people will pay and shareholders at the end of the day are the ones who are going to make the call about whether that is what they want to do as owners of the company. As a system, the banking system is heavily regulated. They get a massive advantage from operating in a regulatory system and we believe there needs to be very strong accountabilities and consequences for when they don’t measure up to those accountabilities. That means you don’t get your pay and you don’t get to work in the business.

FORDHAM:

So do you need the support of Parliament before this goes through?

TREASURER:

I do and I don’t anticipate any issues with that.

FORDHAM:

Hang on, I have heard that before.

TREASURER:

Well, we announced it in May and there have been no objections to it since then. We have been out on consultation with the draft proposal now for months and that has just come back and I am looking to introduce that legislation in October, all things going to plan. That is what we have been looking to do all year.

FORDHAM:

Just lastly, if there is bad behaviour, if it is proven that these bank bosses or other senior executives have acted improperly whose job is it to pull the trigger and take some of that money from them. Is it you as the Treasurer? Is it the regulator? Who is going to have what it takes to actually say righto, you have done the wrong thing, you were given a warning. We are now taking away some of that loot.

TREASURER:

It’s the regulator. It’s APRA. They provide the oversight for the banking system now…

FORDHAM:

How do we know they have got an appetite to actually do that and we are not hearing just from a tough talking Treasurer and we are not going to have APRA say, ‘ oh, sorry, too high price we will keep our hands off it.

TREASURER:

I am very confident they will take that action. We just saw them take very strong action yesterday regarding the Commonwealth Bank. They are putting in place a very wide ranging inquiry into CBA which they won’t be taking three years to do, or five years to do or however long Bill’s showboat arrangement would take. What they are going to do is do this within about six months and then they will be taking action. APRA won’t recommend anything, it will do it. Just like ASIC the company regulator, they are also investigating the Commonwealth Bank. They don’t have to recommend to anybody to do anything. They will just act. What we are doing as a Government is allowing our regulators to use their powers, to take action, to hold people to account and where we think those rules need to be toughened up, whether it was with ASIC a few years ago or now in the banking sector, we are toughening them up, giving them the powers and saying – get on with it.

FORDHAM:

I appreciate your time. Have a good afternoon.

TREASURER:

Good on you, Ben. Cheers.