25 September 2017
Transcript - #2017185, 2017

Interview with Fran Kelly, ABC RN

Subjects: Abolition of ATM fees; Turnbull Government’s Banking Executive Accountability Regime; Turnbull Government’s plan for affordable and reliable energy; Newspoll

FRAN KELLY:

Treasurer, welcome back to breakfast.

TREASURER:

G’day Fran.

KELLY:

The big four banks have scrapped their foreign withdrawal fees from their ATMs, worth about half a billion dollars a year. Did you pressure them to do that?

TREASURER:

I am pleased they have …

KELLY:

Was it your idea?

TREASURER:

Well it was their idea, but when you are putting more pressure for greater competition, greater openness and ensuring banks are looking after their customers, which is what we have been doing for several years now, then I’m pleased they have taken this decision. As you probably know, it follows on from a very similar type of initiative after the Financial System Inquiry where we moved to outlaw profiteering from interchange fees on credit cards and debit cards and things like this. So there are a whole range of costs that are thankfully and usefully coming out of the system now. This is another one. We are taking action now, and it’s good to see the banks are too.

KELLY:

And of course the customers’ immediate push back was ‘well that’s good, but they should be lowering the credit card interest rates too and having a look at those late payment fees.

TREASURER:

Well I think there will be some more news to come there. These are also issues that are being pursued through the House Committee on Economics and there has been a lot of good work done by David Coleman and Scott Buchholz. They are working with the banks on those issues around credit cards. There are also issues I’m continuing to work on about like your fees go when you tap your contactless card at the supermarket. I mean which fee are you paying, are you paying the credit card fees, are you paying the half a percent fee that comes out of your debit card? They are issues that we are still keenly focussed on. So to get the changes here Fran, you have to focus on the detail, you have to do things now, and that is what we are doing.

KELLY:

The Commonwealth Bank go the ball rolling, it was the first to announce it was dumping that $2 fee on the ATMs. The CBA has been engulfed in a number of really significant scandals, the latest money laundering and terror financing charges. Does this ATM decision go in some way in your opinion to clearing the slate for them?

TREASURER:

Their customers will decide that. The Australian public will decide that. We have the Laker Review which is in there at the moment which has been put in place by APRA appropriately. There are also issues a foot with ASIC and CBA and of course there are matters going before the courts with AUSTRAC. They are all very, very serious matters and the Government through its various agencies has been taking the right action in relation to that. Personally, I think the best way you get more competition in the market is when customers come first and when customers are put at the centre and empowered. Everything we are doing in the banking sector is designed to make customers stronger.

KELLY:

Well the ATM move hasn’t satisfied Labor and the Greens. They are immediately and still demanding a Royal Commission into the banks. Why not identify the root problem in the sector via a Royal Commission and then move forward with this legislation you announced on Friday which we will talk about in a second?

TREASURER:

Why would we want to wait three years to do something?

KELLY:

To make sure you are fixing the right thing?

TREASURER:

We are fixing the right things, Fran. We are fixing accountability, we are fixing access to people having their claims heard and dealt with in a fast fashion, we have dealt with increased powers and resources for ASIC. We are just getting on with it. Labor’s policy on this, well it’s not a policy actually, it’s just to have a Royal Commission which would take three years before they actually even did anything. Australians want us to do something now. Labor is getting left behind on this. That view, I would argue, is becoming already redundant because we are already getting on with it. You have to go and make banks more accountable. You have to go and make their executives more accountable. When people have had difficulty getting access to justice over issues that have been raised with their banks because they’ve had to have an army of lawyers to deal with it and there hasn’t been an appropriate complaints mechanism, well that is all the stuff we are fixing. We are taking the action now. Labor wants to do something perhaps in several years, if and when they are elected. That’s not an answer, it’s a cop out.

KELLY: 

I want to get to the executive salaries next, but just before we finish with the ATMs, there are a few texts coming in saying ‘just watch the banks close ATMs to suit themselves now’, I mean they are starting to lose money on them anyway. Are you going to have an eye on that?

TREASURER:

We’ll certainly be looking as we always do at whether they are acting in an uncompetitive way or passing on some of these costs through some other back door or misrepresenting themselves.

KELLY:

What about shutting ATMs altogether so people don’t have that convenience anyway?

TREASURER:

Well I don’t know why they would want to withdraw services for their customers, because I think their customers would respond appropriately to that. The banks are accountable to their customers and they will have to do that to continue to provide services otherwise people will walk away from them or the gap will be filled.

KELLY:

Which they are already doing in huge numbers are according to the ABA over the weekend; three million customers changed banks in the last three years. Looks like people certainly aren’t happy with their banks.

TREASURER:

Well I would encourage them to keep doing it if they aren’t happy. That’s the ultimate test and the ultimate protection that customers have. And what I am seeking to do as Treasurer is make sure customers of banks have greater power.

KELLY:

A grievance for some customers is undoubtedly the size of CEO salaries. The Commonwealth Bank’s Ian Narev received a total remuneration package of $12.3 million last year. Now you’ve released the Banking Executive Accountability Regime, otherwise known as the BEAR legislation. Banks will be required to hold back a fair whack of the salaries and bonuses paid to executives and board members who earn more than half a million dollars. How much power will the regulator APRA have to strip executives of their pay if they do the wrong thing?

TREASURER:

Well, they will have considerable power. I should stress, APRA already has powers currently to deal with issues like pay. This takes things further in terms of the amount of salary that is placed at risk. So for a CEO it will be 40 per cent of their overall remuneration or 60 per cent of what is at risk, whichever is applied there.

KELLY:

So there will be something like $4 million from a total of $12 million package?

TREASURER:

Yeah. And for other executives it will be 40 per cent of their variable or 20 per cent of their total and for smaller banks it’s a 40-10 rule. So there are different rules applying to how big the bank is. But the point is this, if you are a financial planner you have to be licenced. You face accountability when things go wrong. You can be deregistered; you can no longer work in your industry. But senior banking executives, no current regime exists for that.

KELLY:

Well they have to be accountable to their board and there are all sorts of rules and regulations ….

TREASURER:

Well you have to be accountable to your customers too if you are a financial planner but there are regulations that would bar people from industries where they do the wrong thing and misbehave in many other parts of our economy. But they don’t apply to senior bank executives. So we are changing that.

KELLY:

Can I ask you then, how would it work say in the Commonwealth Bank scandal which we’ve talked a lot about, the alleged money laundering, Ian Narev we mentioned his remuneration package there. Would Ian Narev have lost half his pay by now if the BEAR rules had been in place?

TREASURER:

Well, I don’t want to speculate on that given there are matters on those issues that are before the courts, in terms of AUSTRAC and things like that. So let’s have more of a hypothetical discussion about it. What it means is, if you want to be the CEO of a bank, if you want to be the chief risk officer, if you want to be the CFO; any one of these very senior positions in banks, you have to be registered with APRA to do that job. And if you fail in those duties, then you can be deregistered by APRA and depending on the nature of what has occurred, you will lose part of that salary that was placed at risk if it was found subsequently, that your actions were involved in that. The bank would be required to give to APRA what is called an accountability map, so who is responsible for what within the bank. Now currently, what they found in the UK where they had a bit of a different issue because they had banks that fell over, is ‘well, who is responsible’ and you’ve got fingers pointing everywhere, in every which direction. Now you can’t have that. You need to know who is responsible for what’s going on and if things do go wrong, well, did they put appropriate governance control and risk management in place?

KELLY:

And how across the board will this be? There is the possibility of it being applied in what looks like illogicality. If the boss of CommInsure, which is a wealth advisory and insurance arm of the Commonwealth Bank would come under these rules as I understand it, but the boss of QBE Insurance would not come under these rules. Is that right?

TREASURER:

We are dealing with the ADIs and prudential roles of these organisations. But I notice that the banks have made this point. I know the banks would like to delay and conquer this legislation, but I’m not interested in that. I’m interested in taking action now. We started talking to the banks, I first raised this with bank chairs back in February of this year.

KELLY:

But when did they see this legislation?

TREASURER:

They saw it last Friday, and we had the consultation on the specific proposals for the legislation back in July. It was flagged in the budget. So, look this is one of the oldest tricks in the book. I know it is a quick turnaround, but I’m not mucking around Fran. The Australian people expect us to take action now on this and I have full confidence this will be sorted in the course of this week, the final touches to this. I know the banks don’t want a lot of these things to be in there, but I’m not about to give them three months to make a case why they shouldn’t be in there. They are going in. They are going in, I’ll be introducing it to the parliament when we come back and the Australian people I don’t think will thank me for delaying that process. We are not delaying it. We have been cracking on with this since February this year.

KELLY:

Okay, Federal Treasurer Scott Morrison is our guest. Just a couple of quick questions, you are looking at what you are demanding of gas exporters, with reports suggesting as early as tomorrow the government will declare there is a shortfall in east coast gas and announce the volume exporters will need to reserve. So you’ll apply that imposition. Have you identified a major shortfall?

TREASURER:

The shortfalls have already been identified. The issue is the extent of that shortfall. We are just receiving those reports that I commissioned earlier in the year now and we will be going over the detail of that. Now on the gas security mechanism, there is a very specific process we have to follow on that. I’m not going to prejudge that outcome. But what I will say Fran is this, I was up in North Queensland late last week. Now we have a copper operation up there in Townsville whose gas supply agreement runs out at the end of this year. And those that are supplying the gas I understand are looking to sell the company to an offshore…

KELLY:

Okay …

TREASURER:

No this is a very important point, because if that operation in Townsville can’t get long term secure access to gas, then that has a domino effect right across North Western Queensland. There are smelter operations over in Mount Isa, there are mining operations out of Cloncurry and all of this, all of this is linked to getting access to gas. So we need to make sure they get it, not just there, but right around the country. And there is a serious gas shortage in terms of its availability, particularly to the corporate and industrial sector which has a real impact on jobs. So we will be making the right calls to secure gas for Australian use.

KELLY:

And Treasurer just very briefly, another Monday another Newspoll and this one is a bad one for the Government; back to eight points adrift of Labor 46-54 on two-party preferred. Tony Abbott was out and about last week talking about energy and crossing the floor on the Clean Energy Target in the days before Newspoll went into the field. Do you blame him for this result?

TREASURER:

Look Fran, others will make those judgments. What I know is, we are in the middle of dealing with a lot of very important issues, whether that be the energy issue that you just talked about, there are other issues in the middle of the process whether it’s the same sex marriage survey. There are a range of issues out there, people’s wages, we are working towards ensuring they lift, we’ve had some good jobs numbers over the last six months. I think as the results continue to come in on the good decisions we are making, the right choices, when people start to see those over a longer period of time, well I think that’s the time when we might see some change on that front.

KELLY:

Alright.

TREASURER:

At the moment we are doing the difficult job of managing the country and that’s not always going to lead to poll results that others may want. But that doesn’t distract the government from getting energy right, getting all these issues on the economy right, which is exactly what we are doing.

KELLY: 

Treasurer, thank you for joining us.

TREASURER:

Thanks very much Fran, good to be with you, sorry I couldn’t be there in person.