MICHAEL ROWLAND:
Let's go straight back to that scathing report from banking royal commissioner Kenneth Hayne. We're joined now from Canberra by the Federal Treasurer Josh Frydenberg. Treasurer, good morning to you.
JOSH FRYDENBERG:
Good morning, Michael.
MICHAEL ROWLAND:
Let's start with the NAB. Its chairman Ken Henry, chief executive Andrew Thorburn excoriated by Kenneth Hayne in his report yesterday, the Commissioner saying both men essentially don't get it. The NAB board is meeting today. Should both men leave the banking industry?
JOSH FRYDENBERG:
Well, as you would understand, it’s not for me as the country's treasurer to opine on individual cases or, indeed, individual companies. I'll leave that to the shareholders and the board to take those decisions based on what they see as in the best interests of the company.
MICHAEL ROWLAND:
You can have a view, though, on what he said about their behaviour, not learning the lessons from the past, what do you make of that?
JOSH FRYDENBERG:
Well, he had strong words to say about a whole range of companies, and indeed, there were many case studies of their behaviour and I think the nation was shocked by the cases of people being charged for no service, people, dead people being charged, people being sold insurance policies that they couldn't even claim against and then that horrible audio recording of a young man with Down syndrome being sold insurance that he didn't need, that he didn't want, and that he didn't understand.
MICHAEL ROWLAND:
But what does it say to you, and apologies for harping on the point, but Kenneth Hayne said about Ken Henry and Andrew Thorburn in particular, that they not only didn't learn the lessons of the past but Kenneth Hayne had no confidence at all that both men would act on his recommendations?
JOSH FRYDENBERG:
Again, I don't want to comment on individual cases, Michael, but it was a scathing assessment of the industry as a whole, its culture and its conduct and the 76 recommendations give us a way forward to restore the public's trust in these vital financial institutions. The Government's taking action on all 76 recommendations. I think they will bring more accountability and transparency to the system. I think they will make sure that our regulators are more effective and they're certainly putting in place more consumer protections.
MICHAEL ROWLAND:
Kenneth Hayne wasn't happy with those regulators accusing them of going way too softly on the banks for way too long so, therefore, what confidence should Australians have, Josh Frydenberg, that the regulators will act on those recommendations, particularly their consideration of those possible criminal charges?
JOSH FRYDENBERG:
Well, Commissioner Hayne did say yesterday that he has noticed an improved approach in the regulators' performance. They are making the changes that are necessary. We'll continue to maintain a watching brief and we've accepted his recommendation for a new oversight body of both ASIC and APRA but we have provided those regulators with added powers as well as $170 million of added resources for them and for the other relevant agencies. We'll stop at nothing to ensure that these people, and these regulators, get the powers and the resources they need to do their job put it is an approach that they need to take which probably needs to be more leaning in to dealing with this conduct than we've seen previously.
MICHAEL ROWLAND:
Kenneth Hayne says he wants a big shake up to the way mortgage broking operates in this country, recommending both an end to trailing commissions and also an end to up-front fees often paid by the banks to the mortgage brokers. Will you accept both recommendations?
JOSH FRYDENBERG:
There were a series of recommendations around mortgage brokers that we've given a tick to. He wanted to establish a best interest duty and we've said, yes, we'll go through with that. He said he wanted to, as you've just said, abolish trailing commissions and we're going to do that.
MICHAEL ROWLAND:
Up-front fees, will you ban those?
JOSH FRYDENBERG:
This is one of the more difficult issues because it goes to the heart of competition and if you get rid of the mortgage broking business essentially it will all move to the big banks and we don't want to give a free kick to the big banks and we saw both the Murray Inquiry and the Productivity Commission both say that there would be impacts on competition were you to change that model. So what we've said, let's put in place the best interest duty and in three years' time let's do a review to see what would be the implications of changing that fee model for mortgage brokers.
MICHAEL ROWLAND:
But does that override Kenneth Hayne's concern, a very strongly stated concern, about brokers being conflicted accepting those up-front fees from the bank?
JOSH FRYDENBERG:
As you know, the Productivity Commission, the Murray Inquiry, the Sedgewick Review, others have all pointed out that there are real competition issues by moving this model. Mortgage brokers are around in every aspect of our community. There are more than 25,000 people employed in these small businesses. We want to ensure that small business, not big banks, get the advantage.
MICHAEL ROWLAND:
Okay, a few other issues to emerge from this commission's report. We do know the Federal Government opposed it for so long. Josh Frydenberg, deep in your heart, do you have any regrets about opposing, and opposing so vigorously this royal commission in the first place?
JOSH FRYDENBERG:
Look, I'm focused on the future and yesterday we announced that we're taking action on all 76 recommendations. What matters to your viewers, Michael, and the people of Australia is that the trust is restored in our financial institutions, that they are held to account for misconduct, that the culture changes and that's why we've taken action and by the way, that's why we've introduced a number of other reforms which were endorsed by Commissioner Hayne, including the banking executive accountability regime and the compensation scheme that we've now announced yesterday too.
MICHAEL ROWLAND:
No regrets?
JOSH FRYDENBERG:
I'm focused on the future.
MICHAEL ROWLAND:
And, finally, given all the awful things we've heard about the banks, as you've said yesterday in your media conference they've lost the trust of Australians, will the Liberal Party stop accepting donations from the major banks?
JOSH FRYDENBERG:
Oh, look, parties accept donations from a range of organisations who are legal institutions...
MICHAEL ROWLAND:
Given everything we've heard about the banks, will the Liberal Party now stop accepting the hundreds of thousands of dollars you receive from the major banks?
JOSH FRYDENBERG:
Well, Michael, it might be an inconvenient truth for you to know that the Labor Party receives hundreds of thousands of dollars...
MICHAEL ROWLAND:
Yes, and Chris Bowen, the Shadow Treasurer joins us shortly. I’m asking you again; will the Liberal Party stop accepting donations from the major banks?
JOSH FRYDENBERG:
Well firstly, I think our banks are vital institutions, and I think ensuring that they work to the interests of all Australians are important. And they should be allowed, like any other legal institutions in our community, to support political parties as long as the laws are adhered to of the day, as long as there is transparency. Those issues are ones for organisational wings, but don’t think it’s the Liberal Party that’s receiving financial donations from the banks and not the Labor Party...
MICHAEL ROWLAND:
Yes but the Liberal Party can make a decision, and I’ll ask the same question of Chris Bowen, you can make a decision not to accept those donations...
JOSH FRYDENBERG:
Firstly, they’re not my decisions, but secondly...
MICHAEL ROWLAND:
You’re the Deputy Leader of the Party.
JOSH FRYDENBERG:
Well my view, Michael, is that the banks are important institutions, and as long as the laws are adhered to, they should be free to contribute to political parties of any particular persuasion.
MICHAEL ROWLAND:
Josh Frydenberg, thank you so much for joining us from Canberra this morning.
JOSH FRYDENBERG:
Thank you