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ASIC Offers Some Hope for Banking Fairness

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Recently, supervision of the Banking Code of Practice moved from the Australian Prudential Regulation Authority (APRA) to the Australian Securities and Investments Commission (ASIC), who have initiated a thorough review of the code. This first draft of the new code has many shortcomings, and I asked about these. From their answers, it is clear that ASIC are across the shortcomings in the code and I felt they are serious about making the new code a better document that provides stronger protections for customers. A lot of protests have quite rightly occurred around the closure of bank branches.

The truth is that banks are allowed to do that because the banking code contains no provision requiring the banks to provide face to face banking. Also missing from the new code is a guarantee of access to cash and a guarantee of banking services. Currently banks are de-banking competitors like bullion dealers and crypto exchanges. They are also closing bank branches and ATMs to reduce access to cash which they can’t easily monitor or control.

I was encouraged by the answers from Deputy Chair, Sarah Court of ASIC and I look forward to the next draft of the 2024 Banking Code of Practice. Bank customers deserve better protections than APRA have provided in recent years.

Transcript

Senator ROBERTS: Can I start by confirming our meeting will occur on 19 March on the subject of the security of companies offering bullion storage and sales services in Australia. 

Ms Court : That’s right. 

Senator ROBERTS: I look forward to that. Total compensation for the ‘fee for no service’ scandal was $4.7 billion. Since those compensation payments, do you believe financial institutions have fixed their systems and this practice is no longer happening? 

Mr Longo : I’ll ask Deputy Chair Court to comment on that. I think it’s a truism that systems and processes of the banks are always in need of improvement and enhancement, so one can never be certain that those systems will be fixed forever. We certainly think a lot of progress has been made coming out of the royal commission. I know Deputy Chair Court has done some work in this area as well. 

Ms Court : I don’t think I’d ever presume to say that the issues of fees for no service or the compliance and legacy systems of large financial institutions have been completely fixed. I think there’s been progress made. As you say, there have been billions of dollars of remediation. There have also been multimillion-dollar penalties applied by courts in relation to that conduct. We continue to have cases where fees for no service are being alleged, and we are continuing to investigate them and take court action where it’s appropriate. 

Senator ROBERTS: That’s pleasing. Do you think the amount of compensation, $4.7 billion, met or exceeded the revenue that was illegally obtained by financial institutions for the ‘fee for no service’ scam? 

Ms Court : I think you’d have to ask that question of those institutions. The remediation figure is eye watering. 

Senator ROBERTS: I will turn now to the new mandatory Banking Code of Practice that ASIC will consider recommending to the minister. The Australian Banking Association, led by former Labor premier Anna Bligh, has extended coverage to include buy-now pay-later providers by including them in the phrase, ‘Each bank will exercise the care and skill of a diligent and prudent banker.’ Does that phrase provide a quantifiable legal protection to customers, or is it utterly meaningless? 

Ms O’Rourke : I’m happy to assist in relation to the banking code. I might just clarify. In your introduction, you referred to it as a mandatory code, and you also referred to it being taken to the minister. Industry codes aren’t mandatory. You’re right that the banking industry has developed one. The approval process is also one that, if chosen by the industry association, comes to ASIC. It’s an ASIC approval process, not a ministerial one. 

If I come to your particular question about the terms of the code, the code that exists now commenced in 2018. I think, as you’re alluding to, the Australian Banking Association, who wrote the code, and its members, who signed up to it, have been going through a process of updating the code and have proposed to bring it to ASIC for additional approval—for approval under the statutory scheme. One of the issues that are live in that process is the question of the inclusion of the phrase ‘prudent and diligent banker’, which you’ve called out. In the existing code, the one that exists now that was approved in 2018—and there have been some revisions approved since—that phrase is included. In the proposed code, the draft code that’s been prepared, there’s a question about whether it can come out on the basis that it’s duplicative of the responsible lending obligations that already apply to bankers. So that’s the issue. 

As to its progress, I’ll give you some further information. The ABA had done a consultation process to develop the draft code. We now, at ASIC, are doing a consultation process associated with our consideration of approving it because of the importance of these codes to all banking consumers—all Australians. These codes really matter, and making sure that they are suitable in their content and meet the statutory requirements is something we take very seriously. We are undertaking a consultation process. That particular question is one of the ones we’re seeking submissions on and very carefully considering. 

Senator ROBERTS: I think I’ll be coming back to that, Ms O’Rourke. I’ll move quickly because the chair’s needing to hurry. 

CHAIR: I’m staring at you, Senator Roberts, but thank you for proceeding quickly. 

Senator ROBERTS: I raised the fee for no service earlier for a reason. The clause in the proposed Australian Banking Association code, chapter 12, No. 31, used to read that the bank ‘will make sure we have your agreement’ on charging a fee for a new service. That clause has been removed from the new code, meaning the bank does not need to get a customer’s permission before charging them a fee for a new service. If a bank doesn’t get my permission, under the new code can they simply start charging me for services that I did not agree to or may not know I’m being charged for? Are they unwinding your good work on the fee for no service? 

Ms O’Rourke : I’m not particularly aware of that proposed deletion. I think I might take on notice any background relevant to that. The general answer is that there are provisions widely in the code that would be relevant to whether fees for no service can be charged, and indeed I think my colleagues have spoken to the important work ASIC has taken to ensure that that sort of activity does not occur. 

Senator ROBERTS: Can you show me in the draft code where it provides a guarantee of face-to-face banking services that means access to a bank branch? 

Ms O’Rourke : I think that in both the existing code and proposed code the question around branch closures, which is what I think you’re alluding to, is covered by reference to a protocol that exists about the provisions that a bank will consider on decisions as to whether or not it provides banking services in particular communities. It’s not framed, as far as I’m aware, in the way that you’ve framed it: as a right. I can’t point to that, if that’s what you’re seeking. 

Senator ROBERTS: Debanking is proving to be a real problem across businesses that are alternatives to the bank system. Banks are debanking bullion dealers, crypto brokers and third-party cash transit companies. Is there anything in this code of practice that guarantees banking services for customers who use cash, bullion or cryptocurrency? 

Ms O’Rourke : I’m going to have to take that on notice. 

Senator ROBERTS: Is there anything in this draft that guarantees access to the King’s currency—cash? 

Ms O’Rourke : Not that I’m aware of, but I’m happy to take it on notice. 

Senator ROBERTS: Can you show me where it says something like, ‘We undertake to not terminate your banking services for your political views unless a criminal conviction has resulted,’ or similar? As written, the code gives no protection for a customer who exhibits wrongthink on social media, for instance. This is a problem. 

Ms O’Rourke : I think that’s a statement. 

CHAIR: Last question, thank you, Senator Roberts. 

Senator ROBERTS: Why is the sentence, ‘We will engage with you in a fair, reasonable and ethical manner,’ being replaced with ‘efficient, honest and fair’? Is there no room for ethics in modern banking, and is the term ‘efficiency’ used so that the bank can say it’s not efficient for them? 

Ms O’Rourke : I think you’re right to point out that that’s one of the important distinctions between the existing code and the proposed one, and therefore it’s one of the areas that we are consulting on to understand stakeholders’ views on that proposed change. I’m agreeing with you that it’s an important issue for us to explore to understand the basis for the proposed change and what the consequences would be. 

Senator ROBERTS: Are you aware that the Consumer Action Law Centre describes the new code as offering no overall improvements in consumer protection? Do you, ASIC, agree with this characterisation, and will ASIC add extra protections yourself before forwarding the code? 

Ms O’Rourke : As I referred to, we’re right in the middle of a consultation process which includes listening to stakeholders about their perspectives on the new code. We’re taking careful consideration of all the issues that are raised before we move to the decision point that I described earlier. 

Senator ROBERTS: Thank you. I must say that I appreciate the direct and immediate answers. 

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Australia’s Bank Guarantee Scheme – Are You Covered?

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At the May/June Senate Estimates, I asked the Australian Prudential Regulation Authority (APRA) about their accountability and responsibilities for financial services and then probed further into depositor guarantees. I wanted to try and establish whether Australians’ savings are secure in the event of a financial crash. Have a listen.

APRA made the point that Financial Claims Scheme (FCS) is really a last resort. Australian banks and financial institutions are required to have practical plans in place to ensure they can get up and running again in the event of a financial crisis. If that were to fail, however, account holders would be covered for the first $250,000 of their deposited funds per institution.

What this answer failed to mention is that the Financial Guarantee Scheme (FGS) only kicks in once the bank fails. At this point, the bank would have been able to use bail-in provisions to use depositor’s funds to save themselves.

The FCS is also unfunded. The government has not put any money aside to fund the scheme — there is a limit of $20 billion per bank, which is only 10% of what would be needed for just one of the Big-4 banks alone. The Treasurer is not required to trigger the FCS if they don’t want to spend the money.

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APRA dangerously quiet on house prices

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House prices are skyrocketing out of the average battler’s budget. Despite warnings of a possible housing bubble, APRA is banking on the banks only losing 2% from their mortgage books in their “stress testing”. This threshold sounds very favourable to the banks and allows them to get greedy at the possible expense of Australian homeowners.

Transcript

Stress testing banks during COVID-19 dated 15th of December, 2020. I have a question about one of the criteria APRA uses to stress test a bank, and that is a fall in real estate prices or to use a simple explanation, the ability of a bank to maintain liquidity during a real estate meltdown. Can I say it like that?

Well, I think Senator, it’s more a question of whether they can sustain their solvency, which for us it’s more of an issue of a capital, but liquidity is an important consideration as well.

Thank you. From the report, the figure APRA used as a proxy for a real estate meltdown was the loss of $49 billion in residential mortgages over three years. Is that correct?

That sounds about right, I think Senator. I don’t have the document in front of me, but-

That’s what I’m reading. Thank you. And with that loss being 30% of the total bank loss in the period of the stress test, as a loss rate, this would translate into 2% of Australian banks residential mortgage loan book. Is this correct? And please confirm your figure for the value of residential mortgages held by Australian banks. What is it?

Oh, well I think the, now I think the, if we’ve published that number, Senator, I’m quite comfortable to correct, total mortgages the banking system would be-

In the term of residential mortgages.

Yeah. Sorry. Total residential mortgages. Housing loams We’re talking about here. Owner-occupiers and investors would be, it’s in the order of a trillion dollars, I think Senator that’s something that we can come back to you on.

Thank you for that.

Very happy to take it on notice.

Okay. Thank you. Final question on this topic before moving onto a simple topic, can I confirm that APRA is projecting a real estate meltdown would only cost our banks $49 billion in losses on mortgages, and that loss would accrue over three years? That seems to be a very favourable assumption for the banks.

Well, that’s the, that’s the impact that we expect to have on the bank given they have collateral against their loans. Many loans have very low loan-to-value ratios. So in many cases of banks we have loans that even with a substantial fall in real estate values the banks would incur no loss, that’s not to say the borrowers would be unaffected by any means.

Well, I think that’s the concern. Sorry, go ahead.

Senator, I was going to add, I mean, it’s just to your question of projection or forecast, this is stress test. So, it is a set of assumptions that we use to look at the resilience of the sector and the entities involved. So, it’s not forecast or projection.

Okay. Thank you. It’s just that our constituents are concerned that we’ve had 20 years of the banks putting a lot of money into real estate, and taking it away from small businesses and funnelling it into real estate. And we’ve seen real estate prices increase a lot recently. Some people are calling it a bubble. So basically the question amounts to, are you letting the banks do as they please, and then sweetening the impact for the banks?

Well, Senator we don’t allow the banks to do what they please. We’ve got a raft of prudential standards that ask the banks as they’re making commercial decisions to take risk into account, and where we see risks, and I think an example of that would be the recent increase in the buffer, APRA acts and takes action.

Okay. Thank you.

I can just note for the record that, Mr. John Lonsdale was the one who provided that answer. Just leading into your next question.

Does APRA embed staff in financial institutions, like say the Big Four banks?

[Byres] No.

Okay. Thank you. Thank you.

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ASIC keeping banks in line – Government trying to soften them up

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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.

ASIC and AUSTRAC have been doing a good job in slapping fines on banks after the Royal Commission, racking up just over $2.2 billion in enforcement. Its proof that we need heavy fines for bank wrongdoing and that ASIC can do a very good job keeping banks in line.

The government’s proposed changes take away power from ASIC to do the job they have been doing very well. This can’t be allowed, and I won’t allow this government to use the cover of the pandemic to ram through cushy rule changes for their banking mates.

Transcript

Senator Roberts

[Senator Malcolm Roberts] Thank you. And thank you for attending today. Firstly, to ASIC, congratulations on your recent enforcement action against AMP for fees for no service, and charging fees to dead people. I hope that goes well. I know that’s a comment without a question, but I appreciate that. In your most recent ASIC Enforcement Actions Bulletin to December 2020, you list 11 actions still pending from the Hayne Royal Commission. With AMP now underway, is that now reduced to 10, and can we expect further enforcement actions for bad banking behaviour?

I haven’t got the statistics in front of me. Perhaps, Commissioner Armour, the…

I think, yeah Commissioner Hughes might be the best able to answer that.

Yeah, thanks. Thanks Cathie. Senator, good afternoon. We can take that one on notice. I think your assumption is probably correct because we have been netting down. If I can put it that way the number of matters as we’ve gone through. So if I’m going to make this point we had 13 matters referred to us by the Hayne Royal Commission. And we are, as I say, going through all of those matters, as well as 32 case studies that were examined by the Royal Commission, which we took on. But we will give you a specific answer on your question about it. I think you’re correct but I just want to be crystal clear on that.

[Senator Malcolm Roberts] Thank you. Do you have a dollar figure for the total cost to Australian ADI’s, that’s banks, for bad banking behaviour in the last five years as a result of asset enforcement action?

We don’t have a total cost of the behaviour Senator, what we would be able to provide to you on notice is the total amount of civil penalties and other regulatory outcomes that we’ve achieved over the period since the Royal commission.

[Senator Malcolm Roberts] That, that in fact Mr. Hughes, is what I’m asking for. So thank you. So

So Senator I might just add one other aspect to the cost measurement would be the remediation payments as well which we know collectively now are well above $10 billion.

[Senator Malcolm Roberts] Okay. Thank you. To confirm, you currently have 11 enforcement actions before the courts for credit misconduct. Is that correct?

That’s my understanding Senator.

[Senator Malcolm Roberts] And that’s for breaches of responsible lending laws?

Oh no. Sorry. I thought you meant, Senator, in relation to the matters arising from the Royal Commission. I didn’t hear you correctly.

[Senator Malcolm Roberts] No

Not it’s not physically in relation to credit.

[Senator Malcolm Roberts] It just happens to be the same number, 11 in both cases. This is for credit misconduct. I think you have a total of 11, and that’s before the courts?

I’m going to have to check those numbers. I’m sorry, Senator. I don’t have whatever it is whatever it is you’re referring to in front of me.

[Senator Malcolm Roberts] Okay, I have ASIC enforcement update July to December 2020, page seven. There’s a table there.

Can I take that on notice, Senator?

[Senator Malcolm Roberts] Sure. Thank you. I appreciate you valuing accuracy. Have you changed your enforcement since the Hayne Royal Commission?

I don’t believe that we would say we have changed our enforcement. What we have done is prioritised matters that give rise to significant consumer detriment or hardship or which relates to egregious misconduct including matters that might undermine confidence in the market. So there has been a refocus or a swinging of our prioritisation of matters, specifically to address those strategic enforcement priorities. We obviously receive a vast number of reports of misconduct, which my colleague Mr. Day could talk to you about, but Senator, we couldn’t possibly resource every single matter. So we, we put them through a process by which we identify those matters which meet our strategic priorities. And it would also prioritise enforcement matters that might relate to other priorities or thematic priorities such as misbehaviour in the OCC derivatives market those matters, or matters that involve predatory lending or misconduct involving indigenous or remote communities. So we have a number of filters, which we apply in deciding which matters to take to enforcement.

[Senator Malcolm Roberts] So it sounds like ASIC is doing its job and you’re policing responsible lending provisions, correct?

We’re enforcing the laws as they exist today, Senator. We’re very mindful, of course, as Senator McKim was asking me earlier that there are reforms before this chamber in relation to responsible lending. And we will be interested to see the passage of those reforms, if that is indeed what takes place. But where the law is settled then we will pursue those matters where we identify misconduct and there is an actionable bridge that we can pursue.

[Senator Malcolm Roberts] So in a briefing with Treasury, which didn’t involve me but my staff were involved. As were Senator Hanson’s staff, Treasury advised my staff that the reason for the decision to move Responsible Lending Regulation from ASIC to APRA was based in large part, apparently, on the actions of ASIC in tightening lending regulations. Have you tightened the legislation or regulation in respect of Responsible Lending since the Hayne Royal Commission? If so, how? I got the impression,

No

[Senator Malcolm Roberts] No, you haven’t?

No, Senator, ASIC does not have the power, the legislative basis or any legislative basis to change the law or regulations. Prior to the completion of the Royal Commission, ASIC updated its guidance response, its guidance number two zero nine, regulatory guide two zero nine, in December 2019, which provided further examples of the sorts of conduct and considerations that responsible lenders should take into account when making lending decisions. But as I said to Senator McKim, that guidance does not have the force of law, and we have not changed the rules or imposed any new obligations since the Hayne Royal Commission.

Thank you The only thing that has happened since the Hayne Royal commission Senator – sorry to cut you off is that the full federal court handed down its decision in the Westpac matter.

[Senator Malcolm Roberts] Thank you. Is it true to say that any tightening in bank lending practises is the decision of the banks, not of ASIC?

Well, we don’t make decisions on individual loan applications, Senator. Those are entirely matters for the banks. They will have regard obviously to Prudential Standards, administered by APRA. They will have regard to their obligations under the Consumer Credit Act administered by ASIC. And they’ll also have regard to the decisions of courts and of APRA. But the decision to advance a line to any particular borrower, consumer or business is entirely that of the bank, not its regulators.

[Senator Malcolm Roberts] Minister, could you agree that it would be possible for some people to categorise the stripping of Responsible Lending Regulation from ASIC to be a penalty for your enforcement act, for its enforcement action against the banks?

No, I think that’s an unfair characterisation, Senator Roberts.

[Senator Malcolm Roberts] I just want to go on record saying I appreciate the directness and the quality of the responses from ASIC. So thank you very much.

Thank you, Senator Roberts.

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Government cosying up to their bank mates – APRA

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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.

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What is APRA doing about anti-competitive banks? Australian Prudential Regulation Authority Senate Estimates

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De-banking is the process of blocking a certain person or business from having accounts at banks. Banking is central to everything we do. If a person or business is de-banked, they are essentially shut out from society. The banks claim that they have de-banked certain businesses based on their money laundering risk, but anti-money laundering enforcers AUSTRAC have said that no one should be de-banked based on this.

Digging a bit further we find that many of the business being de-banked; bullion dealers, third party ATM operators, cryptocurrency exchanges and cash transport; we realise that many of these are direct competitors to the banks. Something smells fishy to me here. APRA needs to do a better job of investigating and not just take the banks word for it.

Transcript

[Senator Roberts] Thank you all for attending today. Last October, I raised with you the issue of de-banking and use the case of Paul Thomas’ cash in transit business commander security and AUSTRAC and AML compliant organisation that had their business accounts closed by Westpac and then was refused business banking across the whole banking sector, Wayne Byers, chair, you promised to look at it, look into it, two weeks after estimates, Westpac gave notice that they were now closing his personal account with St. George bank, which he’d had for 30 years. A joint account, they’re also closing his joint account he has with the business partner and ending withdrawal rights he has on a major, on a joint venture, sorry a joint mortgage account he has with a relative. Did you look into his case, as you said?

[Witness] So I think the issue is one in which you have a bank that has been found to not be adhering to its AML responsibilities. The bank has therefore looked very closely at it’s frameworks, it’s standards, its controls around detecting and preventing anti money laundering and has made some decisions about whether it thinks customers, including, probably the case you’re referring to, but, can be safely banked and allow the bank to satisfy itself that it is meeting its obligations and they have come to the decision that is a customer that they don’t think they can meet those obligations.

[Senator Roberts] He’s AML compliant.

[Witness] Yeah. I can only tell you that’s their decision.

[Senator Roberts] So it looks like Westpac really got him, well and truly. Now all banks use the same risk management company. Being de-banked by one bank means being de-banked by all the banks, even the Coba banks. So what is this man Paul supposed to do now? His customers need him to resupply their non-bank ATM’s in clubs and pubs. Where is the appeal mechanism in these de-banking cases? Who do they turn to? We’re seeing a bank competitor here being de-banked. Wiping out a competitor.

[Witness] So I’m not sure if your reference, Senator, to all banks use the same risk management company?

[Senator Roberts] Same, same company that assesses their risk for money laundering and so on.

[Witness] I think there’s more than one and, and ultimately it’s an individual bank’s responsibility. It can’t outsource that responsibility. Yes there are suppliers of systems that help banks do that, but there’s more than one. So it’s a difficult, it is a difficult question. And I don’t pretend, I don’t pretend that there’s an easy answer to it. But banks do have their obligations, they have to adhere to them. And they do need to, and it’s quite clear there will be significant penalties if they do not.

[Senator Roberts] And APRA has its responsibilities too because these banks are shutting down whole industries potentially.

[Witness] Yes, but in this particular case where we’re dealing with a bank that is seeking to comply with the law that’s administered by another agency, it’s difficult for us to intervene in that issue.

[Senator Roberts] Well AFCA refused to hear these cases. They don’t hear anti money laundering cases. So I wanted to discuss this issue with AFCA at estimates, but they refuse to attend estimates. The concept of anti money laundering, sorry, the concept of being held accountable for their actions was too much for them to handle apparently so I repeat my question. What do these businesses and their employees do now?

[Witness] I don’t have a, I don’t have a, an answer to that question other than to, other than to try and seek to understand what are the issues of the nature of the business that has caused the concern.

[Senator Roberts] Could, could my office contact yours?

[Witness] Yeah Absolutely.

[Senator Roberts] When I look through the company–

[Chair] Senator Roberts needs to be the last question.

[Senator Roberts] When I looked through the companies that are being de-banked, I see their competitors of the banks, remittance companies, Bitcoin and digital currency vendors, gold bullion dealers, cash handling companies that supply non-bank ATM’s with cash. Why is APRA allowing the banks to increase their market power by de-banking their customers?

[Witness] Well, it’s not, we’re not allowing banks to do, or disallowing banks from doing anything. The issue that is at the heart of this, and as you say, it’s not just this particular company, but it’s remittance services and other things is the potential for cash transactions, or transaction sorry, to be occurring anonymously. And that make it difficult therefore for the banks to satisfy their obligations to AUSTRAC and therefore they have to make a business decision about whether they wish to bear that risk. And in many cases, in the light of the experience of two major banks who’ve had very large penalties levied on them. Clearly they are making sure they are compliant with the law.

[Witness] Senator can I just add one little one.

[Chair] Very, very quickly.

[Senator Roberts] Thank you, chair. Even Paul, Jeff Devic at AUSTRAC has said don’t de-bank these people in the name of AUSTRAC. If this is in response to AML legislation, why have you not asked treasury to review that legislation to correct this unintended consequence? And isn’t this unconscionable conduct?

[Witness] Well senator, we can comment on what’s in our purview. And as the chair has indicated, we don’t make directions for banks to have particular customers or not have particular customers but they do have to adhere to the laws that abide all entities.

[Senator Roberts] Isn’t it unconscionable conduct to wipe out a competing industry?

[Witness] Well unconscionable conduct is an issue for ASIC, not for APRA.

[Chair] We do need to move on Senator Roberts.

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Stop banks stealing our money

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Stop banks in financial trouble from stealing our savings is the message of Senator Roberts’ submission to the Bank Bail-in inquiry.

“The Australian people and small business owners need to know that their savings, whether for mortgages or quarterly tax payments, right now are not safe if a bank faces financial hardship,” said Senator Roberts.

The disappointing and inaccurate submissions from Treasury and APRA claim there is no provision for a bail-in of depositors’ money, in spite of Australia being signatories to international agreements that demand a bail-in strategy.

“This is a blatant lie. Australians need to know that our politicians have ratified the IMF (2008) operating agreement  and the G20 financial management guidance which both clearly state that if a bank fails, taxpayers’ money cannot be used to save it (a bail-out), and instead banks must use a bail-in, which steals depositors’ money.”

The Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2018 that allows banks to take your deposited money and convert to devalued bank shares, was waved through with only nine senators present.

“That Bill legalises a bail-in that international agreements demand happens. My Bill, the Banking Amendment (Deposits) Bill 2020, stops this happening.

“New Zealand has openly acknowledged the same international agreements that Australia has signed and has passed legislation that allows depositors’ money to be taken as a bail-in, so why are Treasury and APRA pretending this can’t happen here?” added Senator Roberts.

A bank bail-in has already occurred in Cyprus and Iceland and many countries now have these provisions as part of their banking system.

Only One Nation is prepared to stand against the international agreements that intrude into the lives of Australians and the banks taking our money to save themselves. “Government bonds issued for the purpose of saving a bank are a much better way to save that bank without costing taxpayers any money,” Senator Roberts stated.

Senator Roberts’ submission can be read in full here:

Senator Roberts makes submission to Bank Bail-In Inquiry
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