Banks Royal Commission should be extended, Nationals MP says

Nationals senator John “Wacka” Williams has supported Labor’s calls for the bank inquiry to be extended.

Nationals Senator John Williams in the Senate chamber at Parliament House in Canberra, Wednesday, February 14, 2018. (AAP Image/Mick Tsikas) NO ARCHIVING

National Party senator and long term banking royal commission backer John “Wacka” Williams has supported Labor’s calls for the commission to be extended, saying the more witnesses it hears from, the more we will learn.

The Morrison government says that if Royal Commissioner Kenneth Hayne asks for more time, he will get it, but Opposition Leader Bill Shorten has called for the February 1 deadline to be extended regardless.

Handing down a damning interim report which contained no recommendations on Friday, Commissioner Hayne appeared to indicate that he would not be requesting more time.

“Prolonged injections of doubt and uncertainty can affect performance, therefore I must execute my tasks promptly,” Commissioner Hayne wrote.

So far the commission has received more than 9000 submissions, but only 27 witnesses have appeared in person.

“Now if we were doing a Senate inquiry and we had say 500 submissions, we would have 30 witnesses at that, so the more witnesses you have, the more you learn,” Senator Williams told ABC radio.

“I think Commissioner Hayne could learn more by extending it and having more witnesses.”

Senator Williams said he was “quite amazed” that Macquarie Private Wealth was yet to appear before the commission.

“We haven’t heard a thing about Macquarie, and I know they were very much in the focus when we launched an inquiry into ASIC back in 2013-14 where Macquarie Private Wealth, they were forced into an enforced undertaking by ASIC for wrongdoings,” Senator Williams said.

“We haven’t heard anything on them. Perhaps there might be something coming out, but the point I make is that Commissioner Hayne has a job to do to report by the 1st of February next year.

“In my opinion if he needs more time, and of course Mathias Cormann’s already expressed this: if they need more time, more money they’ll certainly get it, but what I’m saying is this royal commission is a one-off.

“We probably won’t see another one in our lifetime again. Let’s get it right, let’s do it right, so set the financial institutions up to do the right thing for decades to come by all Australians.”

Senator Williams conceded Commissioner Hayne did not sound like he was requesting more time in his interim report on Friday.

“But let’s see what happens,” he said.

“I think one of the really good things that’s come out of the royal commission to date is that banks themselves and institutions like AMP know they’ve done wrong, they know they’ve got to fix it themselves, they know they’ve got to restore their reputation with the public, and let’s hope they’ll show a lead in many ways to clean up their act and see that people are treated properly, fairly and not ripped off.”

Senator Williams said he had been grappling with ASIC’s failure to effectively punish banks and financial planners doing the wrong thing for a decade as a Senator.

“When I met (ASIC chair) James Shipton for the first time, many months ago now, I said you’ve got to become a feared regulator, you’ve got to just smash people, do your job properly, put them through the court, put them through the criminal court if necessary, act quicker,” he said.

“I’ve seen a case recently where one financial planner was breach reported in 2010, and eight years later, just a few months ago, he was scrubbed out of the industry for a few years. Now why did it take eight years to ban a financial planner?

“That’s a question I’ll have to ask at Senate Estimates.”

Asked whether it was misguided for the government to be putting its faith in ASIC given its past failures, rather than having a regulatory overhaul, Senator Williams said ASIC was the corporate watchdog.

“That’s their job to do the right thing, to police the industry, and for those that are doing wrong to take action against them,” he said.

“This has been the problem where they haven’t been serious enough in enforcing proper punishment, have been too lenient.

“They say the enforceable undertakings have been a very effective mechanism to solve the problems. I have doubts about that.

“I think if you’re going to do the wrong thing, you’ve got to face the law, and ASIC needs to be stricter. We determined in our inquiry in 2013-14 it was a timid regulator. It needs to muscle up.

“It’s got the funds, it’s got the money, it’s got the laws. It needs to act quicker and be far more severe when pursuing punishment.

Senator Williams said he hoped ASIC would be more effective with Mr Shipton as chair and Daniel Crennan QC as prosecutor.

“I hope so. I’ve been on this for ten years. I hope they become more feared, more serious, more severe, to send a message to the corporate world that if you do the wrong thing you will face the music,” Senator Williams said.

He said he agreed with Treasurer Josh Frydenberg that there was no need to overhaul banking regulations.

“I really do think that is the right call,” Senator Williams said.

“If we’re to put huge regulations on the banks, financial institutions, next thing the complaints will be not enough lending to farmers, not enough lending to small business, not enough lending for housing, difficult to get loans, hurt the economy.

“I don’t want to see that happen with just more regulation. Perhaps simplify the regulation would be the best of it.”

However, Senator Williams said he wanted to see mandatory 12 month jail sentences for financial advisers who rip off their customers, and other forms of “decent punishment”.

“When people do wrong, people in serious, respected positions, and next they’re being found guilty for fraud, and forgery, forging a signature — that is a criminal offence, a serious offence, and I’ve seen people do that, be scrubbed out for life as a financial planner by ASIC, only to face a criminal court to get a smack with a wet feather,” he said.

“I mean we’ve got to properly determine proper punishments to stop people from doing the wrong thing, and at the moment I don’t think that punishment is severe enough, and of course ASIC and APRA have been wanting to do their job a hell of a lot better.

“That’s my personal opinion is we need stiff penalties, more severe punishment, so we’ve actually got something to deter those doing wrong.”

Senator Williams said he was hopeful consumers would get justice through the Australian Financial Complaints Authority whose tribunal will begin hearing complaints on November 1.

“The finding is determined by the tribunal and is binding,” Senator Williams said.

“It’s where they can seek justice without having to pay a fortune over a long period of time to go through the courts system.

“I think APRA’s going to be very busy given what the royal commission’s brought out, and probably the most important thing here is it’s good we have strong financial institutions who can afford to pay compensation.

“We’ve seen so many institutions go broke over the years and didn’t have the money to compensate. Big companies do have the money to compensate where they’ve done wrong.”

‘I think you will see a change in attitude in ASIC’: Frydenberg

Mr Frydenberg said the royal commission had been an important revelation of misconduct and inappropriate behaviour in the financial sector.

“Reading the 1000 page interim report is one that shows a pretty frank and scathing assessment of the culture and the compliance and the conduct in the sector, and for me there are really two take-outs: firstly that greed was the motive here, and that the banks put profits before people, and secondly that ASIC as the regulator was too timid, preferring negotiation over litigation, even though they’d had a greater than 90 per cent success rate in the cases that they’ve taken through the courts,” he told ABC radio.

Mr Frydenberg said ASIC had already begun an internal review.

“We have put in place a new special prosecutor, Daniel Crennan QC, to focus on enforcement, and I think you will now see a change in the attitude of ASIC, and I think as the royal commissioner points out in his report, in order to develop a culture of compliance in the sector, you need that moral persuasion, you need that big stick and you need to use it.”

Mr Frydenberg said it was “not good enough” that APRA had never pursued misconduct proceedings against banks and financial planners.

“Quite clearly our regulators need to do better, and they’ll have all the resources necessary to do their job,” he said.

“You can’t legislate morality, but what you can do is properly enforce the law, and that’s a clear take-out of the royal commissioner’s interim report.”

Mr Frydenberg said he had told Mr Shipton and APRA chief Wayne Byres that the public expect them to do better.

“We as the government stand ready to provide them with the support that they need, but let’s not forget the regulators should be enforcing the law, but we should also see greater compliance from the banks and the financial institutions themselves,” he said.

Asked whether it was clear that the banks regarded watchdogs ASIC and APRA as “toothless chihuahuas”, Mr Frydenberg said: “Well in fact it was the tail wagging the dog here, because what was happening was that the financial entities themselves were deciding how they could obey the law, rather than ASIC or the courts or the parliament.”

“That was, again, a telling observation of the royal commissioner’s report,” Mr Frydenberg said.

Mr Frydenberg said there was a range of strong penalties available to the regulators, and the Coalition government had made them stronger.

“Again that is what ASIC will need to do from here: better enforce, be less timid, more aggressive in enforcing the law, so that we can develop a greater culture of compliance within the sector, but there is no excusing the behaviour of these financial institutions and the banks themselves,” he said.

“Basic standards of honesty and fairness went out the door as greed became the primary motive and profits were put before people, and sales of these products and services by the financial institutions became the sole focus.”

Asked whether Commissioner Hayne would refer breaches of the regulations to the Department of Public Prosecutions for potential criminal proceedings, Mr Frydenberg said it was not for him to pre-empt what the Commissioner would recommend.

“It’s very clear his public comments to date and from this interim report, that he has been horrified by what he’s seen in the sector, and that clearly, more needs to be done by the sector themselves to ensure that basic standards of and honesty and fairness and putting the consumer first take place, and that is what I’m sure his recommendations will be striving to achieve,” he said.

Mr Frydenberg said all 9000 submissions had been read, downplaying Labor’s calls for an extension.

“Anybody who has looked at this interim report is left in no doubt of how comprehensive and how rigorous and how professional Commissioner Hayne has been, so I will follow his judgment as to whether he needs more time, and that’s what the prime minister’s made very clear,” he said.

“If he does want more time, he will get more time. Bill Shorten seems to think he knows better than the Commissioner himself.

“If the Commissioner needs more time, and he wants it, he gets it.”

Asked whether the royal commission may have played a role in pushing property prices down, Mr Frydenberg said tighter lending standards were a consequence of “ a number of things”.

“In particular APRA have reined in investor loans and made it more difficult for large loans to be given to investors in the property market, and that has had a subsequent impact on prices, and we’ve seen housing prices, particularly in the capital cities of Sydney and Melbourne come back to more sustainable levels, and the RBA has said that’s a healthy outcome, but at the same time, we’ve got the Labor Party promising a new property tax with their removal of negative gearing, which will then impact more greatly on the value of people’s homes,” he told Sky News.

“That’s not a great outcome for Australian families either, so we will watch very closely what is happening in the housing market, but at the same time we’ll watch very closely the recommendations from the royal commissioner, and ensure that they’re implemented in a way that enhances competition, doesn’t restrict it, and in a way that enhances the economy and doesn’t restrict it.”

Extension necessary: Labor

WA Labor MP Anne Aly said Labor was calling on the government to extend the royal commission because it was an opportunity for “real reform”.

“The interim report doesn’t make any recommendations, but it does speak quite scathingly of a culture of greed within the banks,” Dr Aly told Sky News.

“In order to have real reform and effective reform, it’s necessary, we believe, to give the commission that’s done a wonderful job so far, but give them more time to craft some recommendations, to consult, and to ensure that those recommendations are going to achieve the kind of reform that’s going to address those issues such as this culture of greed.

“I don’t think the timing is something that should be of primary concern.

“I think what a lot of Australians want and their primary concern is that this be addressed in a proper fashion, and I believe and Labor believes that that means that the royal commission is going to need more time to ensure that the recommendations they craft are done with consultation and are crafted and implemented in ways that are going to be effective.”

More money for consumer law sector: Storer

South Australian crossbench senator Tim Storer welcomed Senator Williams’s calls for an extension of the commission, saying he agreed that the Australian Financial Complaints Authority would help consumers.

“I would welcome also an extension of further witnesses, as he mentioned,” Senator Storer told ABC radio.

“What I also am very interested in is looking at an expansion of the current consumer credit legal centres, community law centres.

“I think that they should be better funded, but also the scope of their clients be expanded from individuals to sole traders and even to small businesses and farmers as well, because currently it’s a limited ability of these centres to both fund the work that they do, and also the clientele that they can have, so I would like to see an expansion of the funding available for that, and that could come from the major banks levy.

“I think the banks are in a position to do so, and we could also look at the expansion in terms of the rural financial counselling services that exist to provide legal advice and representation to farmers as well.”