Senator the Hon Mathias Cormann
Minister for Finance
Date: Friday, 27 June 2014
CHRIS UHLMANN: Mathias Cormann is the Finance Minister. Mathias Cormann, will you consider a call for a Royal Commission?
MATHIAS CORMANN: Well look the report was tabled late yesterday afternoon. It goes over more than 500 pages and has 61 recommendations. I have started reading it last night. I will carefully consider it and when I have worked my way through it, we'll make a full response. I might just say that the recommendation for a Royal Commission was not a unanimous recommendation. Senator Bushby, the Chair of the Senate Economics Legislation Committee, dissented from that recommendation and he did make a very persuasive argument that yet another inquiry may not be the best way forward.
CHRIS UHLMANN: But he was the only one who did dissent?
MATHIAS CORMANN: He is the Chair of the Senate Economics Legislation Committee. He is a very senior Senator that has been involved in these sorts of inquiries for a long time.
CHRIS UHLMANN: Can customers have confidence in the Commonwealth Bank's assurances that the culture there has changed when according to the Committee, one of the financial planners has been promoted.
MATHIAS CORMANN: I will let the Commonwealth Bank respond for itself. What I would say is that...interrupted
CHRIS UHLMANN: Unfortunately it won't at the moment beyond just putting out a release.
MATHIAS CORMANN: That's a matter for the Commonwealth Bank. What I would say is that the events that the Committee investigated were events that took place in the past, incidentally over the period of the previous government. Since then, a lot has changed. The industry has worked very hard to lift professional, ethical and educational standards. There is more work to be done on that front and we are certainly very keen to keep working with organisations like the Financial Planning Association, the AFA and SPAA and others in relation to that. Also, regulatory arrangements have changed. There is now a statutory requirement for financial advisors to act in the best interests of their clients, a requirement that we are keeping of course and there is a ban on conflicted remuneration, a ban that we are keeping as well.
CHRIS UHLMANN: But one of the things the Committee found was that accusations were covered up. The bank itself only put up its lawyer before the Committee. The management hasn't actually appeared before it. So can the bank be trusted to heal itself?
MATHIAS CORMANN: I have seen those observations and they are very concerning observations. I do look forward to an explanation from the bank in relation to these matters.
CHRIS UHLMANN: Will you be meeting with them?
MATHIAS CORMANN: I have had conversations with the senior leadership at the CBA in relation to some of these matters over the past week and I am certainly, once I have properly studied the report, I would expect that I will have some further conversations.
CHRIS UHLMANN: But really, can the bank just saying 'there is nothing to see here' be taken at face value?
MATHIAS CORMANN: I do think that the bank needs to provide a proper response to the allegations that have been raised.
CHRIS UHLMANN: To the watchdog, why did it take 16 months for ASIC to respond to a tipoff?
MATHIAS CORMANN: ASIC has come out and has acknowledged that they got some of these things wrong and they've certainly got to lift their game. I would just say that there is right now a Financial Systems Inquiry underway, which also includes as part of its scope a review into the role of ASIC. Once that inquiry reports, the Government will be making some announcements on the way forward.
CHRIS UHLMANN: Are you satisfied with the culture at ASIC given one of the whistleblowers has said it was a very complacent culture and in fact the inquiry found that the organisation itself was timid?
MATHIAS CORMANN: Well, Greg Medcraft certainly has said that he has learned from the experiences of this inquiry. He's provided a response to say that ASIC is using the recommendations in this report to continue to lift their performance and that of course, as the independent regulator in this space, that is what we would expect them to do.
CHRIS UHLMANN: Does it have the resources and the powers that it needs?
MATHIAS CORMANN: We believe it does, but as I've indicated, there is a Financial Systems Inquiry currently underway, which as part of its scope is reviewing the role of ASIC. There are a range of recommendations in the Senate Economics Committee report which we are studying very carefully in relation to ASIC. Once we've worked our way through all of that we will provide a proper and considered response.
CHRIS UHLMANN: Isn't what we see in this case the classic problem of a commissions based culture, that these people are working for themselves and not their clients. Shouldn't your changes to financial planning laws have come after this report?
MATHIAS CORMANN: What you've just raised actually continues to be the case. Conflicted remuneration has been banned. Commissions have been banned and they continue to be banned after the changes that we're proposing to financial advice laws. We were broadly aware of the issues that had been raised in this inquiry. There have been many submissions and many public hearings. The changes that we're proposing to financial advice laws in no way interfere with what is required in order to ensure that these sorts of events don't happen again.
CHRIS UHLMANN: And the laws that you propose will cover bank employees?
MATHIAS CORMANN: Indeed they do. What we have announced last Friday is that bank employees providing general advice leading to product sales cannot receive either an upfront or trailing commission for that sort of advice.
CHRIS UHLMANN: On another matter, it would now seem that the Government will get its repeal of emissions trading through the Senate with the help of the Palmer United Party. Are you confident the new Senate will finish the job in a couple of weeks?
MATHIAS CORMANN: We have absolutely welcomed Clive Palmer's announcement that he will support our efforts to scrap the carbon tax. That is very good news indeed.
CHRIS UHLMANN: But you will have your hands tied on scrapping the Clean Energy Finance Corporation?
MATHIAS CORMANN: Well let's see how that works itself through the Senate. Certainly, Mr Palmer has announced that he won't be supporting that particular proposition, but from our point of view, we don't think it's appropriate to continue to borrow billions and billions of dollars in order to underwrite a bank that is competing with the private sector.
CHRIS UHLMANN: Mr Palmer does seem to change his mind from day to day and week to week. Are you sure that this deal will hold?
MATHIAS CORMANN: I'm very confident that Mr Palmer and the Palmer United Party Senators will support our efforts to scrap the carbon tax, which is very good news for Australia. The party that has been completely inconsistent and been chopping and changing in relation to Budget measures are The Greens. A few weeks ago they were fully supportive of our proposal to ensure that taxes on fuel keep pace with inflation and of course today the Greens are telling us that they want taxes on fuel to continue to go down and down and down every year in real terms over the forward estimates.
CHRIS UHLMANN: Mathias Cormann, we'll leave it there. Thank you.
MATHIAS CORMANN: Always good to talk to you.