Australia’s major banks will be called to appear at least annually before the House of Representatives Standing Committee on Economics to enable the Committee to report jointly to the Treasurer and the Parliament on Australia’s banking and financial system.
The Government recognises that at all times and particularly in challenging economic times globally, it is important that Australians retain faith in our financial institutions and the decisions they are taking.
The Australian economy depends critically on the performance and strength of our banking and financial system. Banks operate under a social licence and have responsibilities to the Australian public.
As part of a broader terms of reference to be provided to the Committee by the Treasurer, the Committee will be asked to examine and report to the Parliament on the banking and financial system, calling Australia’s banks separately to appear before the Committee. This will provide the opportunity for banks to explain how they are responding to funding issues to support Australian consumers and businesses.
In particular the banks will be required to explain:
- International economic and financial market developments and how these are affecting Australia
- Developments in prudential regulation, including capital requirements, and how these are affecting the policies of Australian bank
- The costs of funds, impacts on margins and the basis for bank interest rate pricing decisions
- How individual banks and the banking industry as a whole is responding to issues previously raised in Parliamentary inquiries through their package of reforms announced in April 2016
- Bank perspectives on the performance of the Australian economy, including strengths and risks
The appearance by the banks will ensure they have the important opportunity to transparently account for their decision making and how they balance the needs of borrowers, savers, shareholders and the wider community.
The Coalition Government has already taken significant steps to further strengthen our banking and financial system through the conduct of the Murray Financial System Inquiry and the ongoing implementation of the recommendations of this report. In addition, the Government has acted to strengthen the resources and capability of ASIC, which has not just the investigative and reporting powers of a Royal Commission but also the ability to prosecute and otherwise act against those responsible for malfeasance in the banking and financial sector.
Furthermore, the banking sector has announced their own reforms to banking culture and practice designed to put their customers at the centre of their business.
Tasking the House of Representatives Economics Committee to monitor and report on the ongoing implementation of these policies and commitments, as well as addressing broader regulatory and economic impacts on the banking and financial system, will provide a useful contribution to improving public understanding and informing policy settings.
It is envisaged the Committee would report at least annually on its assessment of the evidence presented by the banks and other witnesses relevant to the subject of its inquiries.
These arrangements will ensure that the banks are regularly, and permanently, accountable to the Committee. This will be a regular, and we would expect, a permanent part of the Committee’s business in the same way that the RBA and APRA have been regularly appearing before the Committee for many years.
The Government would respond to the Committee’s reports and any recommendations therein.
The House of Representatives Economics Committee already has hearings with the RBA and APRA and is therefore the appropriate body to hold the banks to account in a transparent, responsible, timely and cost effective manner.