The government is set to try and ram through destructive changes to responsible lending rules. This axing will mean banks can go back to the bad days of over-lending to people who will never pay their loans back. We cannot go back to the bad days of equity theft where banks lent to people who couldn’t afford it just so the bank could later sell their house for a profit.
The government’s proposed axing includes giving APRA more bank-policing responsibility. I’m sorry to say but APRA has been weak and ineffective when it comes to policing the banks. They’ve managed to hand out just a $1.5 million dollar fine compared to ASIC and AUSTRAC’s impressive $2.2 billion in banking fines.
I won’t allow this government to use the cover of the pandemic to ram through cushy rule changes for their banking mates.
Transcript
Thank you very much Senator small. Senator Roberts, please take us home
[Malcolm Roberts] Thank you Chair and thank you for appearing here
As promptly as possible.
[Malcolm Roberts] Okay. If I can reference a December 2020 headline ‘Westpac hit with a second bank regulator penalty.’ Westpac broke key capital ratios and the consequence APRA levied was to make Westpac keep more money in the bank. In other words, to comply with the law this has the effect of reducing the bank’s ability to lend by reducing their available capital. Is that a fair analysis?
Thanks Senator, for the, for the question. So just to be clear you’re referring to the press release of March 21. Did I hear that correctly?
[Malcolm Roberts] No.
Which one?
[Malcolm Roberts] The headline of December 1st 2020 in Reuters.
December 1st, 2020.
[Malcolm Roberts] Yep.
So at that time, Senator, there were a range of AML issues for Westpac,
[Malcolm Roberts] AML?
Anti money laundering issues. APRA announced at that time, just before Christmas that it was taking action on three issues, there was an additional capital overlay, which I think is the point you’re making, of an additional 500 million on top of the 500 million they’d already applied, a BEAR investigation and some supervisory work. And I’m happy to talk about that. In terms of the capital impost, Westpac is a bank as per other majors who are very well capitalised. They’re running CT1 in the twelves at the moment and they have plenty of capital to lend for worthwhile projects and housing.
[Malcolm Roberts] Okay, thank you. Another headline, April 2021, APRA takes action against Macquarie Bank over multiple breaches of prudential and reporting standards. The penalty there was to keep more money in the bank, that also has the result of reducing the bank’s liability- ability to lend money. Correct?
Senator that’s another example where a bank breached a number of reporting issues on capital and liquidity and also on stable funding. We took action on the bank and part of that action was the capital impost. And I think the same answer applies that you have a bank with considerable capital and considerable ability to lend commercially. And in fact, in the case of Macquarie, they have been lending very significantly into housing.
[Malcolm Roberts] A third example, APRA takes, this is the headline from October 20th. APRA takes action against Bendigo and Adelaide Bank for breaching prudential standard on liquidity, their penalty, well their consequence, was not a penalty. Their consequence was to keep more money in the bank, that also reduces their ability to lend.
Senator, I think all three examples that you give go to breaches of standards that APRA has and as we’ve explained to the Committee previously we have an enforcement approach. The adoption and compliance with prudential standards is critically important to safety and system, safety for depositors in particular. And so we need to and have taken appropriate action, enforcement action on each one of those cases. And so that’s what we’ve done.
Can I just clarify one thing, Senator? So you keep referring about our actions reduce the capacity to lend and that’s not, not quite right, what we do when we’re adding more capital to the bank effectively we’re changing the mix in which it uses either its shareholders money or depositors’ money to fund loans. And the actions we take mean effectively that a bank has to use more shareholders’ money and less depositors’ money to fund a loan, but it doesn’t actually stop the bank from or reduce the bank’s ability to lend. It just says, use more of your shareholders money, put- get your shareholders to put more on the table and use less depositors’ money.
[Malcolm Roberts] Doesn’t it make the bank, reduces the bank’s ability to lend in that it makes
Only if they don’t have enough capital to meet their regulatory requirements and then they have to stop. But as John has said, these banks are running well above their minimum regulatory requirements. So the issue is really, it changes their, because capital is more expensive than funding from depositors it makes their funding costs slightly higher.
[Malcolm Roberts] So the headline in the Reuters that, well, the first paragraph, the Australian bank regulator, APRA, said on Tuesday it was forcing Westpac Banking Corp to raise its cash reserves after it fell short of prudential standards its second enforcement action in a year against the country’s number three lender.
So the effect of what we did was to increase the minimum amount of shareholders’ money that we required Westpac to have.
[Malcolm Roberts] Okay.
But they use that money still to lend.
[Malcolm Roberts] I ask because in a meeting of the Responsible Lending legislation with my staff, between my staff and Treasury, Treasury indicated that a substantial reason behind moving responsible lending regulation from ASIC to APRA was because ASIC was imposing restrictions on the bank’s ability to lend. But you’ll argue with this, then that is exactly what we see that APRA doing, is it not, because it’s altering the liquidity?
Well, I think we’ve already answered that question Senator.
[Malcolm Roberts] So since the Royal Commission, has APRA ever launched an action against an ADI or bank that resulted in a fine, a real penalty, not just complying with the law?
Yes we have Senator. And an example of that would be Westpac again, for a breach of reporting standards, a small fine but it was the maximum fund that could be levied under the FSCODA Act.
[Malcolm Roberts] What was the fine?
It was from memory, 1.5 million.
[Malcolm Roberts] Isn’t it amazing how 1.5 million is a small fine these days but anyway
Well we’re talking about a major
[Malcolm Roberts] It is all relative Does the National Consumer Credit Protection Amendment Supporting Economic Recovery Bill 2020 allow APRA to fine a bank that engages in systemic breaches of the Responsible Lending Guidelines.
So no, no Senator.
[Malcolm Roberts] Thank you. What action is open to APRA to regulate low doc home loans which are provided for in that legislation.
Well that, that is not something within our responsibility Senator.
[Malcolm Roberts] Well, we could find none
Senator Roberts we will need to wind up soon.
[Malcolm Roberts] Yep, I’m almost done. What about all the people who lose their homes their savings, their marriages, their mental health. Is there no consideration for the human cost of bad bank behaviour in this legislation?
Senator, is that a question?
[Malcolm Roberts] Yes.
If it is it’s not a piece of legislation that APRA has responsibility for Senator
[Malcolm Roberts] But you will have, or for Responsible Lending.
No, that’s not correct Senator.
[Malcolm Roberts] I thought you were getting, going to have responsibility for Responsible Lending.
What we have, as explained earlier, is we have a standard, Prudential Standard, APS220 there are some very minor changes to that and APRA’s current stance in relation to how it assesses credit will be pretty much the way it has been for many years. So no change
[Malcolm Roberts] Under the new legislation,
Well correct Senator.
[Malcolm Roberts] Thank you. APRA runs the Bank Executive Accountability Regime – BEAR scheme which fines bank executives for bad banking behaviour. You have taken action against the banks for bad behaviour, ASIC and AUSTRAC have fined, have caused fines on the banks of over $2 billion in the last three years. How many of the executives in charge of the banks have been personally fined through BEAR?
I was going to say the BEAR doesn’t give us capacity to impose fines on individuals.
[Malcolm Roberts] None at all?
That’s not part of the legislative framework.
[Malcolm Roberts] Okay. Well last question Chair. Westpac are moving night safe wallets and advising their business customers to not accept cash. Isn’t that rule number one for a bank, accept the Queen’s currency. On what basis are APRA allowing the banks to make such fundamental and illegal decisions without reference to APRA.
Senator, APRA does not have particular standards in place in terms of what commercial activities banks undertake and services that they provide. So, so they are commercial issues for the banks. Thank you Chair. Thank you. Thank you.
Just on your last point though I do think it is a little bit of an issue if banks do, and I’m not saying that Senator Roberts is necessarily correct, but banks refuse to accept legal tender, but I will leave that part there. Thank you very much for your time.
