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The Banking Code of Practice was originally designed to safeguard consumers from bad banking practices, however since the first code was issued, there has been a continual watering down of these protections, effectively rendering the code meaningless.

Currently, ASIC is conducting a review of the code. During the recent Senate Estimates, I inquired whether certain protections would be included, such as protections against de-banking, ensuring access to cash, and maintaining in-person banking services at branches.

Unfortunately, the responses provided were not encouraging. If this review fails to restore consumer protections to the Banking Code, One Nation will pursue a legislated response by way of a mandatory code.

Additionally, I inquired about ASIC’s handling of the recent crypto scandal, where Australian investors lost hundreds of millions of dollars due to ASIC failing to advise of the risks. This contrasts with the Mayfair scandal, where ASIC’s enforcement action actually caused the company and their investors to undergo a loss that would not have occurred without ASIC’s actions.

Transcript

Senator ROBERTS: Thank you for appearing today. Last estimates I raised a series of concerns regarding the Banking Code of Practice, and Ms O’Rourke was very forthcoming in her answers; thank you for that. At one point, Ms O’Rourke, you said you would update me if there was any progress on the negotiation for the new banking code. Could you provide an update now, please, in respect of these four matters. Is ‘prudent and diligent banker’ still in there? It’s a meaningless phrase.  

Ms O’Rourke: Yes, we had that discussion at the last hearing, about the code of practice. I’m happy to update in relation to the discussions we’ve been having. To step back a moment—  

Senator ROBERTS: On those specific four points: is ‘prudent and diligent banker’ still in there?  

Ms O’Rourke: I think, prior to that particular question, you said, ‘What’s the state of play?’ The state of play is that there’s not yet a final code that has been finalised by the ABA to put to us for approval. The answer is that it’s not yet determined whether or not that phrase ‘prudent and diligent’ will or will not be in the final code. Can I give a little bit more detail?  

Senator ROBERTS: Sure.  

Ms O’Rourke: It is in the existing code. In the draft code published by the ABA last year, in relation to which we’ve had a consultation process, there was a proposal to narrow the application of ‘prudent and diligent’ to very specific circumstances and for other circumstances to rely on other legal provisions. That has been something through the consultation process we have had submissions in relation to, and it is something we have been speaking to the ABA about. The ABA is still considering its position, and there isn’t a final outcome.  

Senator ROBERTS: Is there a guarantee of face-to-face banking services?  

Ms O’Rourke: That is not in either the existing code or the proposed code from the ABA. Like I say, there is no final position in relation to what the final code will look like but that’s one that’s not been proposed, nor was it particularly raised in the submissions we received.  

Senator ROBERTS: This is not a comment aimed at you, Ms O’Rourke, but we’re not interested so much in whether or not something was in there or will be in there; we’re interested in—purely, that’s something we believe is necessary. Is there a guarantee of access to the King’s currency of cash?  

Ms O’Rourke: The current code does not have that, nor does the proposed code. 

Senator ROBERTS: Is there a guarantee not to debank a customer for competitive or social reasons like, ‘We don’t agree with your politics’?  

Ms O’Rourke: That’s not in the current code nor is it proposed to be in the revised code.  

Senator ROBERTS: I believe you took on notice the debanking issue, but the response only answered ‘other matters’. Has ASIC considered the debanking issue? It’s a device by which the banks harm the business of their competitors and manipulate the markets to their financial advantage—as they have, for example, with cash in transit. This says misuse of market power to me. Has ASIC considered the debanking issue?  

Ms O’Rourke: ASIC has been part of discussions around the cash-in-transit issue you referred to. I’m not sure whether you’ve had an opportunity to speak to other agencies, including the RBA, Treasury or others involved on the government side, or, indeed, if you’ve had opportunities to speak to the ABA or others. We’re more interested observers than participants in relation to cash in transit. We don’t have any regulatory hooks or provisions that particularly go to the provision of cash or its transportation.  

Senator ROBERTS: What about debanking?  

Ms O’Rourke: Similarly, there is no requirement to bank or to take steps in relation to debanking in relation to which we could take action.  

Senator ROBERTS: On the crypto scam: Senator Hume asked some very fine questions today. Your testimony was that you were aware of this scam for quite some time, yet the scam companies Infinity CapitalG, Topmarketcap, Iron Bits and Richmondsuper were added to the scam list just yesterday. Why did it take so long to get those companies onto the scam list?  

Ms Court: As I said in my answers to Senator Hume, when that information came in to us it was for the purposes of a continuing criminal investigation at that time. At that time, in August 2023, we didn’t have up and running the investor alert list we have now; that commenced in November 2023. We hadn’t received any reports of misconduct or any indication that any of those entities referred to in the article—that consumers were continuing to invest or lose money as a result of investments in those entities. However, following the media reporting, we went back and had a look at those entities, and I think we took a decision that we would put four out of the five—even though we had no information about continuing losses to investors—on the investor alert list, for completeness.  

Senator ROBERTS: Thank you. On Mayfair 101: ASIC went after a company that appears to have been trading *legally. Mayfair 101 were up-to-date with repayments to lenders and, as demonstrated over the last three years, had financial resources as they fought your action. ASIC considered Mayfair’s advertising misrepresented their investment product and took immediate action to freeze the company’s asset. By doing that, ASIC almost cost 500 Australian investors $200 million but the company has survived. ASIC’s actions have, however, caused a lot of damage to investors and the company for no good reason we can see. One Nation, I must mention, as I previously stated, is one of those investors. This matter has been dragging on for three years and now ASIC is going for another round. What’s the state of play now?  

Ms Court: I gave quite a long answer to Senator Bragg earlier, when you weren’t in the room, about the status of Mayfair—  

Senator ROBERTS: Okay; we’ll leave it. I want to get on. Thank you for that. Your actions were ostensibly to protect investors, yet the investors in Mayfair have not had access to their funds or a return on their investment since you started your action, despite the entity they invested in still being viable. Why are you hurting the people you profess to protect?  

Ms Court: As I said in my response to Senator Bragg earlier, ASIC acted quickly in relation to the Mayfair matters for the purposes of protecting future investors. The matter’s been before the court, and Mayfair has been found to have engaged in misleading conduct. The court has imposed a $30 million penalty on Mayfair, which I understand remains unpaid. There are still several matters currently before the courts, and the courts are testing ASIC’s claims and the defences to those claims. That is an appropriate place for them to be determined now. 

A Central Bank Digital Currency goes hand in hand with the idea of a Digital Identity. With all of your information and money stored online, central banks or governments could turn off your access to money and society in the blink of an eye.

The last time I asked the Reserve Bank about a Central Bank Digital Currency, there seemed to be no real plans. Conveniently they are now considering it, just as the feared Digital Identity Bill proposal is being pushed by Government.

Transcript

[Chair] Senator Roberts.

Thank you. Thank you for appearing again. I’m gonna start with a sincere compliment, Mr Debelle. I’ve been impressed with your frankness and your directness and your succinctness. You convey a lot of confidence and I would also like to start by complimenting the Reserve Bank for the answers I received in the last estimates, which after examination were complete and factual. So question one, Chair: the Reserve Bank has now signed on to the International Central Bank Digital Currency Platform, Project Dunbar, and I quote, “aims to develop prototype shared platforms for cross border transactions which will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks.” Now, as I understand it, Mr Debelle, Australia will be testing this platform, along with Malaysia, Singapore, and South Africa, which suggests we have a digital currency to use, to test the platform. Where is the Reserve Bank on the development process for the Reserve Bank Digital Currency and what’s the timeframe here for testing and implementation?

Hello, pass that one to Ms Bullock, please, Senator, she’s the expert in this space. Well, has carriage of this, at least.

Thank you, Senator. So, the first thing to note is that Project Dunbar is a proof of concept, so I’d distinguish it from a pilot. Pilot is where you actually have actual real money. This isn’t a pilot, it’s actually a proof of concept. So really, what it’s about is going through the technical infrastructure you might need, the legal arrangements you might need, to patent requirements you might need to set this sort of multicurrency approach up. So there is no Central Bank Digital Currency, we don’t have one, the other central banks don’t have one, it’s purely a proof of concept, if you like, It’s a little bit of a desktop exercise with a little bit of experimentation with technical approaches to do it, so there’s no actual Central Bank Digital Currencies involved.

Okay. Thank you. Oh, sorry.

I was just gonna go on to your second question, if that’s all right.

Okay.

So, your second question was about where we are at with Central Bank Digital Currency. So, we’ve had a multiyear process in this. We’ve done some small experiments. We’ve experimented internally with the concept of a wholesale Central Bank Digital Currency. Again, it’s not real, it’s just sort of a mock-up if you like, and we’ve done that internally to see whether or not individual banks could perhaps use it for settlement between them. We’ve also expanded that fairly recently. There was a report in December, Project Atom, which was an experiment again with Commonwealth Bank, National Australia Bank, Perpetual and Consensus and ourselves. And the concept here was, again, a proof of concept. It wasn’t a pilot; a proof of concept to see whether or not a Central Bank Digital Currency, paired with tokenized syndicated loans, would actually make a more efficient way of having syndicated loans transacted through the economy. We released the report on that in December and I think it proved that there were some efficiencies in this area, but –

Excuse me, did you say there were inefficiencies?

Efficiencies.

[Roberts] Efficiencies.

Efficiencies. So, syndicated loans is a very manual process, and quite lengthy, and what the project proved was if you tokenized the syndicated loans, you had a Central Bank Digital Currency to transact amongst the various players in the syndicated loan, that actually that made that a much more efficient process. Whether or not you can do it with normal payment systems as well is another question, but we didn’t test that, so there’s that. We’re also participating, as you mentioned, in Project Dunbar with the Bank for International Settlements Innovation Hub and those three other countries, and we’ve recently formed ourselves a Central Bank Digital Currency Group in the Payments Policy Department, and we’re going to be engaging with the Digital Finance Cooperative Research Centre, which is looking at all sorts of things digital. We’re going to be engaging with them on looking at Central Bank Digital Currencies as well, so that’s a little bit of a potted history of where we’re at with our work on this.

Okay. Thank you. If a new digital currency is to be created out of electronic ledger entries, will existing amounts of cash be converted into digital dollars? The public may be confused about how this is going to work. Can the Reserve Bank please provide a simple overview of what happens after the project gets the green light? Where’s the value coming from? So when we have a cash?

What we’re assessing, Senator, really, is exactly that: their value, given we have a pretty decent payment system as it is, which includes cash, clearly, but also electronic settlement, and you sort of nailed the question, really, which is: is there value in this? Is it worth the investment at this stage or not? Michelle, I don’t know if you wanna add anything to that.

The only thing I’d add, Senator, is that there is no suggestion in which we are getting rid of cash. This concept is not to replace cash and it hasn’t even been decided that we would do it. This would be a decision not for the Reserve Bank, but for, in fact, the Government, and it wouldn’t be replacing cash, so that’s very clear.

When I was talking about the value, I wasn’t talking about the value of the process. Is it gonna be more efficient? Is it worth doing, so I appreciate your answer and that quite clearly, that’s one valid interpretation of my question, but what I was getting at was, if someone’s got so much value in Australian dollars, how will that be converted into digital currency dollars or whatever the currency is? Will they still have that purchasing value?

Sure. So the way that most central banks are looking at this around the world is that the central bank itself won’t be providing people with digital money. It will work like cash does. So at the moment, if you want cash, you go to your ATM or your bank and you withdraw some cash from your bank account. A digital currency, if we had one, would work in a very similar way. You would go into your bank and your bank would have presumably a digital wallet, or you’d have a digital wallet, and you would take some money out of your bank account and you would put it into Central Bank Digital Currency, just like cash. So you can think about it in a very parallel way.

Yes, but if someone’s got $2,000 in cash today in their bank account, will that give them the equivalent purchasing power if there’s a conversion into digital currency?

Yes. Correct. It would be exactly the same as if it was a $100 bill or $100 on your mobile wallet.

Okay. Thank you. Now the BIS is involved. So, one specific case: our foreign exchange reserves are used to settle international transactions. These will now be replaced with the Reserve Bank Digital Dollars, if it goes ahead. Is the process to simply replace the US dollars we have in reserve with US Government-issued crypto dollars or a similar value-basis digital currency?

[Debelle And Bullock] No.

[Bullock] Do you wanna take this?

Straight to the chase: no, Senator, we would still continue to hold $USD reserves in the instruments we currently hold them at, which is primarily US Treasuries.

Okay. That’s pleasing to hear. What are the risks in doing this, for example, if this was handled badly, not necessarily from the Reserve Bank, but for the people you’re dealing with overseas, if the system wasn’t tight? What are the various risks that you can foresee that need to be managed?

This is why I think there’s a lot of water to flow under the bridge before any advanced economies really have launched into this. There are obviously cyber issues. You need to make sure that the system is secure. Overseas consultations demonstrate that people are very concerned about privacy, which is a very valid concern, but by the same token you’re also concerned about a use of digital currency for criminal purposes, so there’s a balance there. Another concern, that is one that most central banks identify, is concerns about the banking system and whether or not there might be a flight of deposits, if you like, to the Central Bank Digital Currency, which would have implications for banks’ balance sheets, potentially make it easy to run on banks, if people were concerned about banks, so there’s a whole lot of financial stability risks and issues associated with it. That’s just a sample of some of the issues that need to be considered if we were going to go in this direction and have some sort of what I would call “retail” Central Bank Digital Currency.

Thank you. Two more questions, Chair. Digital or cryptocurrency is not backed by any asset. It’s literally an exercise in trust that the government can protect the value of someone’s currency. Is this the time now to start talking about getting an asset backing behind this new currency, such as gold?

Senator, just like cash at the moment, it would be a feat currency, which is to say it isn’t backed by anything. And you’re right. It’s all about trust in the institutions of the country, in the government, in the Reserve Bank, so in that sense, it would be just like cash, if we were going down this route, it would be an unbacked currency.

But it’s backed by the government’s capacity to raise revenue from its citizens, basically.

Backed by the government’s capacity to raise revenue, did you say?

Yep.

Thank you. Last question. During COVID, there’s been a hell of a lot of money spent on non-productive outcomes. As much as food and rent can be considered non-productive, they’re essential, but they’re non-productive, the outcome of long-term borrowing for short-term gain is inflation. Is spending on productive capacity: roads, railways, bridges, dams and irrigation in this recovery phase, likely to produce a lower inflation outcome across forward estimates than continuing to spend on what can only be described as economic sherbet?

I don’t know, I mean, that’s an an interesting question, Senator. I mean, I’m not sure I would draw that distinction, I think food I would regard as a pretty productive and essential service, an essential thing for people to consume, so, I mean, we build roads for a purpose, not just because, which is to satisfy people wanting to use them, and the same with food and same with shelter, so not quite sure how we can draw such a clean line between what’s productive and unproductive.

Well, perhaps, well food is essential, as I said, perhaps spending on non-productive assets: entertainment, instead of travelling overseas, people are buying new cars, that kind of thing. What I’m talking about is spending on such items that may be essential, but not producing increased wealth, could lead to inflation. That’s the risk. On the other hand, spending on something that increases productive capacity, like a dam with irrigation systems to supply increased food productivity and lower the cost of food, leaves people better off and wealthier overall. That’s what I was getting at: a productive capacity, rather than just consumption.

There is a reasonable amount of dollars investment in infrastructure at the moment, that’s increased quite a bit, both from the Commonwealth and the State Governments, so that sort of spending is absolutely happening. Again, I’m still not quite sure I would draw such a clean distinction. In the end, people consume what they want to consume and I’m not sure it’s up to us too much to tell them what’s good and bad about that, within reason.

Well, that’s a wonderful statement to hear coming into my ears now. I love that, but yeah, sorry?

I said, “I thought you’d like that.”

So what we’ve got, though, is an acknowledgement that there is money being spent on infrastructure. You’ve answered my question. I just personally believe, Chair, that we need to spend more on improving our productive capacity. Thank you very much. Again, Chair, I’d like to put on record that the Reserve Bank always answers quickly, succinctly and factually. So thank you. It’s really appreciated.

[Chair] Dr Debelle, you’ve got a fan there.

[Roberts] Yep. He has.

[Debelle] Thank you.