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Day 710: "We can't wait"
Good afternoon, and welcome to day 710*.
Today in summary: Labor's Andrew Leigh wants Westpac hauled before the House Economics Committee ASAP; sticking points remain on Rebekha Sharkie's rural finance reform bill; and ANZ says it isn't like Westpac.
-- Alex
alexs@schwartzpro.com.au
Today’s banker panic level: 😠 🙃 😇
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Banking lobby stalls on Sharkie's rural finance bill
Key sticking points still remain on the rural finance reform bill, including who pays for valuations, the definition of a small business loan, and whether the bill is needed at all given changes to the banking code.
Calls mount for APRA to unleash the BEAR
There are more heads ripe for rolling, regulators believe, despite Westpac's protestations that any more change would be "very dangerous".
Caving in court — the trend of post-Hayne lawsuits
After swearing their innocence during the banking royal commission, several firms have since admitted fault, and settled in court as soon as a case kicks off.
Reprimand for AMP as top exec skips hearing
The Westpac saga isn't going away any time soon.
Shadow assistant minister for Treasury Andrew Leigh wants Westpac to appear before the House Economics Committee "at the earliest opportunity".
"We can't wait for the next hearings next year when Westpac is scheduled to come before us.
"This scandal has already seen Westpac’s CEO and chair step down, but it's important that we look at this from an institutional standpoint. It's important we get to the bottom of what Westpac did wrong, how the child exploitation financing occurred, how the money moved, and how this was allowed to recur 23 million times — almost one breach for every Australian."
Treasurer Josh Frydenberg told journalists today, when asked about Andrew Leigh's call:
"Look, obviously we support that committee and the work that it's doing and the issue as to who they call is a matter for them. As for having banking executives and regulators and others come before a Parliamentary committee, we see no problem with that."
Westpac's anti-money laundering chief was told she didn't have the skills for the job and would have to take a more junior role after informing the bank that it faced the largest fine in corporate history, the AFR reported.
Meanwhile, proxy advisory firm ISS is calling on fund managers to vote down Westpac’s pay report at its December 12 AGM, The Australian reported.
And the Future Fund has joined major Westpac investors in threatening to force a spill of the entire board unless more directors go, The Australian reported.
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Education Minister Dan Tehan gave a second reading speech introducing the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019.
This bill amends the Superannuation Guarantee (Administration) Act 1992 to provide a choice of fund for more people, with changes to begin July 1, 2020.
Under current superannuation laws, about one million Australians cannot choose the fund their superannuation entitlement is paid into due to clauses in their enterprise agreement.
"Given the compulsory nature of superannuation, individuals should be able to decide where their superannuation goes," Tehan said.
"Under this Bill, it will no longer be possible to deny choice to individuals on the grounds that they are employed under an enterprise agreement or workplace determination that specifies their fund for them.
For example, why should a student working two jobs — one in hospitality and one in retail — who is covered by separate enterprise agreements be required to have their superannuation paid to two different funds?"
The Financial Services Council welcomed the bill as a vital step in modernising the default superannuation system.
“This is particularly important for the two million Australians working multiple jobs, who may still today find themselves in the position of being required under outdated superannuation laws to have multiple accounts. This erodes their capacity to maximise their super savings,” FSC CEO Sally Loane said.
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Minister for Water Resources, Drought, Rural Finance, Natural Disaster and Emergency Management David Littleproud gave a second reading speech introducing the Farm Household Support Amendment (Relief Measures) Bill (No. 2) 2019.
The bill further implements the recommendations made by the Review Rebuilding the FHA: a better way forward for supporting farmers in financial hardship.
"The bill also makes it easier for farmers to access the right person to conduct the farm financial assessment. Removing the requirement that this assessment must be conducted by a prescribed adviser provides flexibility on who can conduct the assessment."
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APRA finalised revised guidance on its superannuation Business Performance Review and response to submissions letter following a six-week consultation period.
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The Banking Code Compliance Committee published a Guidance Note on clause 10 of the Banking Code of Practice – regarding banks’ obligation to engage with customers in
a fair, reasonable and ethical manner.
"Clause 10 is one of the code’s most important obligations and should be embedded within banks’ internal culture to ensure they meet the BCCC’s expectations - to act fairly, reasonably and ethically in all circumstances," a statement from BCCC said.
The guidance note highlighted that clause 10 was a broad obligation and extended to the design of banks’ products and services, marketing and sales practices, processes and policies.
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Reserve Bank of New Zealand governor Adrian Orr released the central bank's November Financial Stability Report, noting that financial system vulnerabilities remained "elevated" and more effort was required to ensure the system remained resilient over the longer-term.
"International risks to the financial system have increased. Global growth has slowed amid continued uncertainty about the outlook for world trade. This has resulted in reductions in long-term interest rates to historic lows, including in New Zealand. While necessary to maintain near-term inflation and employment objectives, prolonged low interest rates can promote excess debt and investment risk-taking, and overheat asset prices."
The Canberra Times | Reuters | The Guardian
Meanwhile, across the ditch Reserve Bank of Australia governor Philip Lowe said negative interest rates were “extraordinarily unlikely” to be used in Australia, but he wouldn't mind a bit of QE.
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The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 passed the lower house unamended today, closing in on business owners and unscrupulous pre-insolvency advisers who deliberately wind up companies to dud creditors and workers.
An extra A$8.7 million over four years will also go to ASIC to help it pay for expert liquidators to investigate and report back.
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The public servant leading the introduction of new professional standards for financial advisers vowed to push ahead with the government's controversial code of ethics, despite protests from the industry, the AFR reported.
Facts and future up for grabs in retirement review
Putting self-interested behaviour at the heart of policy is key as experts, independent and otherwise, gather evidence for the latest Treasurer to think about.
Mutuals to benefit post-Hayne: KPMG
Maintaining trust and transforming for the future is the timely tagline for KPMG’s report on mutuals.
Australia Institute dismisses SG freeze as unfounded 'group think'
There is "ample" economic space for workers to demand both higher wages and superannuation contributions, the Australia Institute argues.
Policy and report summaries are only available to Advisory Team subscribers. Upgrade today.
Following shareholder queries, ANZ provided an update on whether it could be exposed in the same way as Westpac to money laundering or terror financing risk.
The bank also confirmed it was not aware of any impending litigation from AUSTRAC.
ANZ chief risk officer Kevin Corbally said:
“Given recent issues identified by AUSTRAC within the industry, we have been reviewing the systems and processes we use to transfer money to ensure we are reporting the information required by regulators. While the review is ongoing, it has found no material issues to date.”
In March 2017, ANZ joined the Fintel Alliance, a public-private partnership led by AUSTRAC to combat serious financial crime, including child exploitation.
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The Bank of England fined the US bank Citigroup a record £44 million for submitting incomplete and inaccurate regulatory information to the Bank between 2014 and 2018.
It's the cover-up that's killed Westpac, argues columnist Parnell Palme McGuinness in the AFR.
"Westpac is no Enron. But it has made an art out of spin and it looks dangerously like it might have swallowed some."
A Sydney-based fintech's efforts to sell its anti-money laundering blockchain software included meetings with Westpac chairman Lindsay Maxsted and home affairs minister Peter Dutton, writes Chanticleer columnist Tony Boyd in the AFR.
"The meeting ended with Dutton saying Home Affairs should find out if AUSTRAC had the budget to afford to implement the Identitii software. But nothing came of it.
"HSBC is the only bank to have adopted the Identitii software to attach more data to some payment instructions sent over the SWIFT network. It is believed this is the first deployment of a live blockchain in a global bank to manage compliance."
Westpac’s AUSTRAC scandal is an ugly reminder of the great risk reality of modern banking, writes Chanticleer columnist James Thomson in the AFR.
"The Westpac example is a stark and terrible reminder that transformation might well be closer to the start than the end, and that a huge catch-up will be required until risk management processes and systems – particularly those around non-financial risk – are where the community needs them to be."
Trust in banks needs the systems to back it up, writes AFR contributor Hugh Harley.
"When it comes to our corporations, there is an important sense in which we are all in it together – the provision of goods and services, of jobs, of investment, of taxes, of dividends, of appropriate norms and behaviours, and – dare I say it – of trust.
"Their special social importance makes this particularly true for banks, and that, in turn, makes every period a challenging time for them."
The Australian's business correspondent Richard Gluyas argues Westpac should try to replicate NAN’s coup by filling its key chair and chief executive positions with seasoned bankers.
"NAB was in crisis in February when a devastating final report by royal commissioner Ken Hayne led to the departures of chairman Ken Henry and chief executive Andrew Thorburn.
"Since then, however, the bank appointed chairman-to-be Phil Chronican as acting chief executive, and recruited Royal Bank of Scotland chief executive and former Commonwealth Bank retail boss Ross McEwan as CEO. Concerns about NAB’s stability have eased, with the market now confident in the bank’s senior leadership."
Westpac’s leaders have been totally caught out by the pace of events unfolding after AUSTRAC announced its case against the bank, writes The Australian's associate editor Andrew White.
"Hanging over everything the bank has done in the past week is the threat that the whole board could find themselves out of work. After shareholders delivered a thumping 66 per cent no vote against Westpac’s pay practices last year, anything over 25 per cent “against” this year will trigger an automatic vote to spill the board."
A culture of arrogance brought Westpac executives down, posits University of Western Australia and Griffith University professor Peter van Onselen in The Australian.
"McCann fostered a confidence within Westpac off the back of surveys that showed it was the most trusted of the big four banks. That confidence morphed into arrogance in sections of the bank when Westpac came out of the royal commission as the least damaged of the big four.
"This culture of arrogance played into the mismanagement this past week. It may even have indirectly contributed to the cultural failures that saw Westpac inadequately respond to AUSTRAC investigations in recent months and years."
Westpac's plight will be chilling for corporate Australia, writes senior business columnist Stephen Bartholomeusz in the SMH.
"If the Westpac outcome provides the new benchmark for governance, boards and CEOs will have to come to terms with the prospect they could be judged guilty, their companies disrupted and their jobs lost before they have seen the evidence let alone determined accountability."
Business marketing expert Tim Reid, artificial Intelligence entrepreneur Dr Catriona Wallace and former director of the UN World Food Programme Simon Costa AO will speak at the Financial Planning Association of Australia (FPA) Professionals Congress in Melbourne from November 27-29.
First State Super CEO Deanne Stewart will give the keynote address at the CEDA Women's Economic Security event in Sydney on November 28.
AFCA CEO and chief ombudsman David Locke, ASIC senior manager of credit, retail banking and payments Kevin Foo and ABA policy director Justin Mining will speak at the Legalwise 4th Annual Credit Law Conference in Sydney on November 29.
The Parliamentary Joint Committee On Corporations and Financial Services will hold a public hearing into the regulation of auditing in Australia on November 29. To be in Canberra, this is the second in a series of three hearings.
Macquarie, Bendigo and Adelaide Bank, Bank of Queensland, Suncorp, Citi, and the Australian Banking Association will appear before the House Economics Committee on November 29.
ANZ, Citi and Deutsche Bank won the right to cross examine the ACCC over its interaction with ASIC and immunity beneficiary JPMorgan in the regulator's landmark criminal cartel case. Five days of hearings have been scheduled in the Downing Centre Local Court in Sydney from December 5.
ASIC commissioner John Price will be delivering a keynote speech 9th Annual Australasian Business Ethics Network Conference at RMIT in Melbourne.
ANZ deputy CEO Alexis George will speak at this CEDA event in Melbourne on the decline of public trust in our organisations on December 11.
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