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12 Feb 18 – Interview with Fran Kelly, ABC Radio National

12 February 2018

Date: 12/02/2018
Time: 08:12 AM

FRAN KELLY:    Australia's banks will be in the dock from today when the Royal Commission into misconduct in the financial services industry opens in Melbourne. Commissioner Kenneth Hayne has 12 months to investigate unethical behaviour by the banks, the super funds and insurance providers, the compensation procedures in places and how the sectors are regulated. Earlier this morning we heard from National Senator John Williams who's seeking a blanket legal immunity for all victims and whistle-blowers who appear before the Commission.


JOHN WILLIAMS:    I think we've got to have a clean sweep here so that people can come forward with total confidence without fearing of being sued and losing their house, their assets or whatever.

[End of excerpt]

FRAN KELLY:    John Wacka Williams who's urging all the banks to follow the big four and waive the so called gag orders. Anna Bligh is the chief executive of the Australian Bankers' Association. Ann Bligh, hello there.

ANNA BLIGH:    Good morning, Fran.

FRAN KELLY:    Do you think that's a good idea all the banks should put it on the table straight off from the start, no gag orders, everything will be waived?

ANNA BLIGH:    Fran, banks have said from the outset that they will be transparent and they will cooperate fully with the Commission. Last week all of the major banks indicated that they would not rely on any confidentiality agreements that had been previously signed with either customers or staff and all banks have disclosed cases to the Commission in the last four to five weeks through submissions regardless of whether they're subject to confidentiality and all non major banks are currently giving consideration to waiving those clauses and a number have already decided to do so. So …

FRAN KELLY:    John Williams says it's important because already people are worried by this and they're telling him they're worried by this. So just to be clear for anyone listening that's a rock solid guarantee from the big banks, not yet from all the banks, but no customer will be sued if they breach the confidentiality agreements for the Commission?

ANNA BLIGH:    That's right – and I should say that Suncorp and Bendigo have already resolved to join the major banks and all other non majors are currently giving consideration to this and I would expect that we will see the same. Banks want this Commission to be an inquiry where customers can come forward where not only banks get a better picture of what's gone wrong and what's gone right but that the public does. So being open, being free of any concern about confidentiality is important to that process.

FRAN KELLY:    So you can guarantee no retribution against any current staff member who might testify against his or her bank?

ANNA BLIGH:    Absolutely. There are now very strong provisions in place not only in banks but in federal legislation that protect whistle-blowers in these sorts of circumstances and that's what a staff member would be, they'd be a whistle-blower and entitled to the protections of whistle-blowers. This is an important inquiry. It matters I think to the Australian public and to bank customers that at the end of the inquiry everybody feels that the inquiry was conducted fully, rigorously and openly and it is not in anyone's interest, including banks, for us to get to the end of this process and people to feel that there was some nook or cranny that they should have looked at and they didn't.

FRAN KELLY:    And yet we know already and we will see it on display too, all the banks are lawyering up engaging large teams of legal counsel to represent them before the commission. Won't that automatically create a power imbalance between the banks and the witnesses, I mean how will victims and whistle-blowers be given a fair hearing if it's got all the hallmarks of an uneven legal fight?

ANNA BLIGH:    The Commissioner Kenneth Hayne is making his first public statement today so it is an important day. He's already indicated that there will not be extensive cross examinations where witnesses are subject to repeated questioning. It is important I think that all parties feel that their legal rights are protected – and that includes banks – but the Commissioner who we'll hear from today, is the person who ultimately has to ensure that all parties have an equal say before the Commission and that their legal rights are protected. As I said, this commission of inquiry, it's important that it not only gets to the bottom of the matters that have disturbed the public but is seen to get to the bottom of them in a way that is rigorous and fair and I think we'll have a better idea of what that will look like when we hear from Commissioner Hayne today.

FRAN KELLY:    We know the banks didn't want this Royal Commission, though, so how honest and up front will they be about their misdeeds?

ANNA BLIGH:    The commission- people keep saying the Commission starts today. It has actually been very active since the Commissioner was appointed. There was a request for documentation from the banks about every instance of misconduct between now and going back to 2008. Every bank has complied with those requests. This is a process that gives the banks the opportunity to put their case. It also gives Australians, I think, a chance – and I think Australians can be pretty good judges, harsh but fair – a chance to have a good, hard look at their banks and see what's working well, and some things are; what's already changing, and we're seeing massive changes right now; but importantly, what still needs to be changed and improved. 

FRAN KELLY:    I think you've warned that this won't be always comfortable, or perhaps even worse than that. There are a long list of scandals to unpick: money laundering; manipulation of bank bills; the problems with CommInsure; the collapse of Opes Prime, Storm Financial. The Royal Commission is armed with coercive powers to seize documents and compel testimony. Do you think that's going to be required? How rough is this going to get for the banks? 

ANNA BLIGH:    Well, I've made comments that I do expect this will be painful for banks, and potentially for a lot of their staff. Bank executives have already indicated that when you put together a submission that identifies misconduct or poor behaviour spanning ten years, it can be very confronting when you read all of that, and it will no doubt be painful for some of that to be put into the public arena, particularly for people to see it all come together in ways that might give better ideas about trends and other areas. But ultimately, as you say, the Commissioner, if he believes it's necessary, has very broad, extraordinary powers. Banks have indicated that they're there to fully cooperate. Let's see what he says today.

FRAN KELLY:    Well, it's what he's said already is, on Friday, they've released a briefing paper highlighting the collective profits earned by the major lenders in the year to September 2017: $35.9 billion. Did that give the banks an indication of where the focus might be? That pre-emptive focus on profits, and does that make them nervous as they look at their profits being spoken about openly as against the treatment of customers? 

ANNA BLIGH:    The background paper provided by the Commission is a very factual document. It talks about … 

FRAN KELLY:    [Interrupts] It's true, that is the right amount. 

ANNA BLIGH:    Yes, but it's not only in relation to that. It talks about profits; it also talks about the important role that banks play in the Australian economy; the critical role they play in the funding of small businesses. It talks about the various market shares that each bank has, and it also talks a little bit about how Australian banks compare globally. What it does identify is that while Australian banks are healthy and strong and profitable, they are not more profitable than a number of other banks that are comparable in other jurisdictions – sit around middle or a little bit higher than the middle of the pack globally. So it's a very factual document that, I think, does help both the staff of the Commission and those who are taking an interest as Australians to see where banks fit into the national economy. 

FRAN KELLY:    It's 8:21, our guest is Anna Bligh. She's the chief executive of the ABA – the Australian Bankers' Association. Well, also taking an interest in where the banks fit is the Productivity Commission. The Commission issued a draft report last week that shows – well, you already know – the big four dominate the marketplace, but the Commission's issues paper noticed- the Productivity Commission told us the so-called four pillars policy, designed to prevent mergers between the big banks, had reduced competition without a doubt. Now, neither the Coalition nor Labor seems keen to abandon it, but given the Productivity Commission says it's redundant and ad hoc, do you think we should drop that policy? 

ANNA BLIGH:    The Productivity Commission's report is actually a really interesting report, Fran. What it does identify …

FRAN KELLY:    [Talks over] I'm sure it is. 

ANNA BLIGH:    It does identify that the four pillar policy has some impact on competition in Australian banking, but it equally makes the point that it has a very important role to play in maintaining the strength and stability of the system. 

FRAN KELLY:    But it did indicate, as did Peter Harris, we're not getting that right, that balance. I mean, it pointed out, for instance, that the majors, the four, achieved a profit margin of over 36 per cent last year compared to 24.7 per cent by other domestic banks. And Peter Harris of the Productivity Commission recommended a competition champion was needed. Do you agree with that? 

ANNA BLIGH:    Well, this is the draft interim report of the Commission. We'll look at it. Banks will respond to it, as they're being asked to do by the Productivity Commission. But I can understand the Government's reluctance to launch into changing the four pillar policy. Remember, our policy kept Australian banking safe in the Global Financial Crisis, and every piece of public policy in this area has to find the right balance between strength and stability and security of people's money, as well as competition in the sector. The report does not find that our banking sector is uncompetitive; in fact, it identifies a range of innovations that Australians enjoy every day like PayWave, 24-hour banking, that is not the features of many other jurisdictions in the world, and makes the point that those innovations have been driven by competition, but it does identify there might be some more areas where we could be more competitive, and there are some public policy issues to be considered by the Government in that regard. 

FRAN KELLY:    I think it's fair to say that the report did find that customers weren't benefitting enough from the behaviour of the banks; that more competition within that behaviour would benefit customers. 

ANNA BLIGH:    It's one of those areas with public policy you have to find the balance. Do we want more competition at the expense of strength and stability? These are tough public policy questions; one that, no doubt, the Government will turn its mind to when they see the final report. But banks will be interested in responding to this report. I don't think Australians want a weakened or an unprofitable banking sector. So these policy settings are complicated, and I think Australians do expect that governments will find the right balance in that regard. So could there be some more levels of competition? I think we're going to see some of that from other areas, not just from public policy. This year is a big year for banking: big technology innovations that will make a difference for customers; open banking that will allow customers to shift their data from their current bank to a competitor, for example, I think will have a bigger impact on competition than we have seen from any other initiative for a long time. 

FRAN KELLY:    Anna Bligh, thank you very much for joining us. 

ANNA BLIGH:    Thank you. 

FRAN KELLY:    We look forward to speaking to you again as this Royal Commission rolls on. Anna Bligh is the chief executive of the Australian Bankers' Association. 


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