Thursday, November 30, 2017

The Coalition and the banks: wingman turns inquisitor

What is it with banks? The Coalition began dismantling the rules Labor had put in place to protect the public from them within weeks of taking office.

The task fell to Arthur Sinodinos, a former chief of staff to prime minister John Howard who had come to parliament from the National Australia Bank.

Labor's Future of Financial Advice Act banned conflicted remuneration (bonuses for tellers and other staff who steered customers towards profitable products) and imposed an overarching obligation on financial advisers to act in the "bests interests" of their clients.

Sinodinos said the "best interests" requirement would go. Bonuses would still be allowed under certain circumstances. Also out would be requirements that financial advisers inform existing customers how much they are removing from their accounts in the form of commissions, and to ask them to renew the arrangement every two years. They were "burdensome red tape".

When Sinodinos stepped aside to give evidence to the NSW Independent Commission Against Corruption on another matter, acting minister Mathias Cormann took up the case. The first letters informing customers what they were paying in commissions were just about to go out when, while the parliament wasn't sitting, Cormann had the Governor-General gazette a regulation that removed the requirement, a regulation that couldn't be disallowed until parliament next sat and it had been tabled, something he delayed as long as possible.

He gazetted the regulation on the day a Senate committee headed by Nationals senator John Williams found that the financial planning division of the Commonwealth Bank had engaged in "forgery and dishonest concealment of material facts" and called for a Royal Commission.

Later Fairfax Media and the ABC revealed that commission-based staff at the Commonwealth Bank had been selling life insurance policies with definitions that denied payouts to Australians who had had heart attacks.

In recent months the present minister Kelly O'Dwyer has been making it a priority to disrupt the governance arrangements of the only sector that seriously takes on the banks: the non-profit low-fee industry super funds.

Why has acting as wingman for the banks been so important to the Coalition? It'd be lovely if the Royal Commission found out.

In The Age and Sydney Morning Herald