Chris Bowen says APRA’s review into CBA ‘too little, too late’

Chris Bowen says the CBA review is a report on one bank, when we should be receiving final royal commission findings on the whole sector.

Labor treasury spokesman Chris Bowen says today’s damning APRA review of the Commonwealth Bank represents a report on one bank at a time when we should have been receiving a final royal commission report into the entire banking sector.

Mr Bowen’s comments came after Treasurer Scott Morrison said APRA’s report should be a wake-up call for every board member in Australia.

The banking regulator has forced the CBA to top up its minimum capital levels by $1 billion after finding it guilty of “complacency”, a “reactive stance”, as well as being insular and not learning from experiences and mistakes.

Mr Bowen said Labor welcomed the report. “But really, we should have received the final report into Australia’s entire financial services industry a long time ago,” he said.

“The APRA inquiry was launched into the CBA in August last year. That’s 18 months after Labor called for a royal commission into our banks and financial services.

“For two years, the Treasurer refused to implement this. In fact on the very day that APRA launched its inquiry into the Commonwealth Bank, the Treasurer was asked by (Sky News Chief Political Reporter) Kieran Gilbert, ‘does this nullify once and for all your view the calls for a royal commission, or is this just CBA specific and not industry-wide as Labor would advocate?’, and the Treasurer said, on this day in which the APRA report was launched: ‘Labor’s position is a political one. It’s not about fixing problems of the banking system. It’s about grandstanding by Bill Shorten.’

“The Australian people don’t need any more evidence that this is a Treasurer who gets the big

calls wrong and has no judgment when it comes to the big decisions, and simply is not up to the job,” Mr Bowen said.

The Labor treasury spokesman accused Mr Morrison of lying in the press conference in which he condemned the CBA board this morning.

“Extraordinarily, either the Treasurer doesn’t know what is happening in his own party and in the party room and parliament, or he is misleading the Australian people about it,” Mr Bowen said.

“He said that in relation to his Bank Executive Accountability Regime, that the parliament wanted to delay it and they withstood the pressure.

“It was his Liberal Party members who asked him to delay the Banking Executive and Accountability Regime by 12 months.

“The Labor Party suggested and moved in the parliament that small institutions, credit unions, customer-owned banks, small banks, receive an extra 12 months to prepare.

“The Treasurer agreed with that, but his own Liberal party room revolted against him and Liberal Party senators in a senate inquiry called for a full 12 month delay, so he might want to check his facts, or alternatively he might want to stop telling lies.”

Shadow Treasurer Chris Bowen.

Mr Bowen said Mr Morrison had also “lied” in suggesting Labor’s proposed royal commission would only have investigated the big four banks.

“Again, here in this room, on the day we announced the call for a royal commission, I said that we indicate we would expect the royal commission to look at the financial services industry, not talking about broader corporate Australia but the financial services industry,” he said.

“That is more than just banks, more than just the big four. It relates to financial services providers, financial institutions, banks, insurance companies, credit unions, friendly societies and then when asked about superannuation I said super funds are part of the financial services industry as well, so the Treasurer should stop making things up about Labor’s policies and start getting on with his job, and he should admit that he has been getting it wrong to two years, not just politically, not a political judgment, but he got it wrong two years ago.”

Mr Bowen singled out Financial Services Minister Kelly O’Dwyer’s admission last week that the government had erred in taking so long to announce a royal commission, saying Mr Morrison should follow suit.

“I’m going to give Kelly O’Dwyer some credit here. She is not the Treasurer,” he said.

“She didn’t make this decision. She struggled to defend the government’s decision on (ABC TV show) Insiders, but it wasn’t her decision to delay the royal commission, it was the Treasurer’s.

“The Treasurer sent her out to do the government’s dirty work.

“Scott Morrison and the Prime Minister Malcolm Turnbull made it clear: it was a joint decision between Malcolm Turnbull and Scott Morrison not to hold royal commission.

“Let’s not send Kelly O’Dwyer out to take the rap. Scott Morrison should admit his personal error, not politically, but he should apologise to the victims of these bank scandals for not holding the royal commission, not having the judgement to do it so much earlier.”

Mr Bowen said he would not call for the resignation of CBA directors as it was a matter for the company.

“Catherine Brenner made the right decision to go as chair of AMP, but individual directors have to reach their own conclusions and companies have to reach their own conclusions based on the facts, and if the Treasurer is implying that he knows more, or the Commonwealth Bank has told him more, he might want to explain those remarks,” he said.

“At this point I see no reason to call for the resignation of the chair of the CBA or others directors.”

Scott Morrison says APRA report into CBA damning and a wake-up call

Mr Morrison said he had called CBA chairman Catherine Livingston to Canberra to discuss the bank’s Austrac money laundering scandal on August 8 last year, almost three weeks before APRA initiated its inquiry into the bank’s governance, culture an accountability on August 28.

“In all of these institutions, it’s the boards that I hold accountable for what happens in each of these organisations,” he said.

“They employ the executives, they set the tone, they’re the custodians of the companies or the institutions’ culture and values.

“At the end of the day, that is where the action has to be taken in these institutions to set the right course.”

Mr Morrison said he expected CBA board members to resign. “A number of board members and executives have already gone,” he said.

“My understanding is there will be others who will be leaving and that’s what I expect to happen.”

Mr Morrison said APRA’s findings on the CBA, handed down today, were damning.

“It found there was a complacent culture, dismissive of regulators, an ineffective board that lacked zeal and failed to provide oversight, a lack of accountability and ownership of key risks by senior executives, a remuneration framework that had no bite, and that they were reactive, slow, and had under-resourced systems and processes internally,” Mr Morrison said.

“I want to stress while the CBA is a sound financial institution, and that issue is not in question, that rap sheet that I’ve just read out from APRA is damning.

“The report, I think, is required reading not only for every financial institution in this country, but, frankly, it should be the next item on the agenda of every single board meeting in this country, regardless of whether you’re a bank or not.”

‘Complacent culture’ condemned

The bank regulator has forced Commonwealth Bank to top up its minimum capital levels by $1 billion after a damning review of the lender’s culture found it guilty of “complacency”, a “reactive stance”, as well as being insular and not learning from experiences and mistakes.

It also found CBA’s bumper profitability “dulled” the bank’s senses to signals that might have otherwise alerted the board and senior executives to problems emerging inside the banks, as well as a deterioration in CBA’s risk profile.

CBA will also enter into an enforceable undertaking to conduct remedial action following the Australian Prudential Regulation Authority’s inquiry.

CBA chair Catherine Livingston. Picture: Britta Campion

Mr Morrison said the APRA findings went to the heart of the responsibilities of board directors.

“It’s not a retirement job. It’s a very serious job I know there are thousands of board directors around the country who take it very seriously,” he said.

“But this should be a wake-up call for every director in the country, particularly those who are the custodians of the savings and share holdings of Australians.

“They have been let down on this occasion, and terribly.”

Mr Morrison said he welcomed the fact that APRA was requiring the bank to provide a written assessment once they had reviewed the report’s recommendations.

“We need to be reassured, we need to have assurances provided by all of those key institutions that what has been identified here in CBA to the extent that it exists in other institutions, that is identified and being addressed,” he said.

Mr Morrison said the government’s Banking Executive Accountability Regime had strengthened APRA’s powers in assessing the transparency and accountability of the banks.

“It was the beginning of last year, when I went to the UK, to look at the various accountability measures they put in place in the UK and I returned and sat down with the chairs of all the banks and said we would be doing the same thing in Australia,” he said.

“I announced it in last year’s budget. It was legislated in February this year.

“This is serious action the government is taking knowing full well of the issues that needed to be addressed in this sector.

“This government took action last year in last year’s budget to address the very issues that are at the heart of APRA’s findings here as a result of this inquiry.”

‘We will keep persisting’

Mr Morrison said Australians should be as disappointed as he was in the wrongdoing in the financial sector which was exposed in the APRA report and has come to light through the banking royal commission.

However, the Treasurer claimed the government had “never shied away from fronting up” to the problem, despite having opposed the royal commission.

“We’ve been taking the action quite sternly, to great resistance on occasion from the institutions, and often without the support of the parliament,” Mr Morrison said.

“But we’ve persisted and will keep persisting.

“We are taking action to ensure that this can’t happen again, but that requires not just the government to act, it requires the bank boards to step up.

“But not just bank boards. I really don’t want this to just be a wake-up call for the banks. There are boards sitting around the country who need to read it very closely and ask them the hard questions at the next meeting.

“I expect them to do so, and their shareholders should expect them to do so and their customers should expect them to do so or take their business elsewhere.”

Asked whether yet another damning report was making the job of selling company tax cuts harder, Mr Morrison cited the government’s bank levy.

“When it comes to the banks themselves, the bank levy, $16 billion will be raised by the time all the tax cuts go across the entire economy,” he said.

“We’ve had a very specific measure to deal with those major institutions and we introduced that. The Turnbull Government introduced that.

“People thought it was a bit harsh last year, we shouldn’t have done it, but we persisted with the measure. It is a permanent measure, not temporary, a levy on the banks.”

Government fought tooth and nail against banking reform, royal commission: Labor

Deputy Labor leader Tanya Plibersek said she did not give much credit to the government for APRA’s findings.

“I don’t give much credit to a government that fought tooth and nail against the establishment of a royal commission,” Ms Plibersek told Sky News.

“It was dragged kicking and screaming to not just the royal commission but to taking any action in a systemic way in the banking and financial services industry, and Scott Morrison is the guy that’s going to give these banks a big tax cut at the next election and give their executives a big tax bonus as well when he takes the levy off people earning more than $180,000 a year, so I don’t know, I think he likes to talk tough but I’m not seeing a lot of sincerity there.”

Labor senator Kristina Keneally said she was not convinced by Mr Morrison’s claim that the government had been dealing with bank wrongdoing prior to the royal commission either.

“I heard Scott Morrison say that. What he left out is the fact that they resisted at every step taking any type of action in regard to the banks,” Senator Keneally told Sky News.

“This was the same Scott Morrison who ran around telling us that ASIC was the tough cop on the beat and that it would be greatly damaging to the economy and shake the confidence in our banking sector if we dared to have a royal commission into the banks.

“I mean some 260 times members of this government’s front bench have resisted, denied, said that we didn’t need a banking royal commission, so for them to sit here today and try to say, ‘well, you know there’s this terrible culture and we’ve been taking action’.

“I think it’s a little too clever by half from a government who had to be dragged kicking and screaming to a banking royal commission and from a government that is proposing next Tuesday night to give some $13bn to the banks in the form of a corporate tax cut.”

Senator Keneally said the banking royal commission was nowhere near finished.

“And let’s also just remember that to get to the banking executive scheme, the BEAR legislation the government’s brought in, they had to be dragged kicking and screaming to that,” she said.

“The Hayne royal commission is going to continue on. We are going to see additional evidence about the misdeeds at our banks, and we are going to need a systemic response at the end of that.

“It’s all fine and well for Scott Morrison to stand up today and say that boards need to read this paper. They do. They do need to read the APRA report.

“But we also need to wait and see the outcome of this royal commission so that we don’t just have individuals here and there resigning, but rather that we have the change we need within the banking system that protects customers and ensures that we don’t see this type of behaviour in the future.”

APRA report commissioned well before royal commission: Laundy

Small business minister Craig Laundy said it was important to note that the APRA report had been commissioned well before the announcement of the banking royal commission, along with “a raft of other measures” that the government was in the process of implementing pre royal commission. were in the process of implementing pre Royal Commission.
“The royal commission obviously the latest development, and the findings have shocked everybody, but this just demonstrates that we were getting on with investigating and forcing a change in culture,” Mr Laundy told Sky News.

Mr Laundy said Financial Services Minister Kelly O’Dwyer was right last week to admit that the government erred in not announcing a royal commission earlier.

“You’ve heard from Kelly and the Prime Minister last week and you’re hearing it from me now: we at the time thought that we were dealing with the issue as best we could, however, what we’ve heard has shocked all of us, and I heard in the intro Tanya Plibersek make some comments about sincerity and what we would do post it,” he said.

“I can assure you that we don’t take what we’ve heard lightly, as you’ve heard from the Treasurer this morning, albeit that this report and the outcomes that come about this morning come pre royal commission, but the findings of it, again, are the latest wake-up call to not just banks, as you mentioned in your intro, but business irrespective of size across the country, and this impacts on me in workplace relations for something as simple as paying their employees all their entitlements, to that level, up to board level, where you must conduct yourself accordingly and appropriately.”