- Thank you very much Senator small.
Senator Roberts, please take us home
- Cheers and thank you for appearing here
- As promptly as possible.
- [Senator Roberts] Okay.
If, if I can reference a December, 2020 headline
'Westpac hit with a second bank regulator penalty.'
Westpac broke key capital ratios
and the consequence effort levied was to
make Westpac keep more money in the bank.
In other words, to comply with the law
this has the effect of reducing the
bank's ability to lend by reducing their available capital.
Is that a fair analysis?
- Thanks Senator, for the, for the question.
So just to be clear
you're referring to the press release of March 21.
Did I hear that correctly?
- No.
- Which one?
- The headline of December 1st 2020 in Reuters.
- December 1st, 2020.
- Yep.
- So at that time, Senator,
there were a range of AML issues for Westpac,
- AML?
- Anti money laundering issues, APRA announced at that time,
just before Christmas that it was taking action
on three issues, there was an additional capital overlay,
which I think is the point you're making,
of an additional 500 million on top
of the 500 million they'd already applied,
a BEAR investigation and some supervisory work.
And I'm happy to talk about that.
In terms of the capital impost,
Westpac is a bank as per
other majors who are very well capitalised.
They're running CT1 in the twelves at the moment
and they have plenty
of capital to lend for worthwhile projects and housing.
- [Senator Roberts] Okay, thank you.
Another headline, April 2021,
APRA takes action against Macquarie bank
over multiple breaches
of prudential and reporting standards.
The penalty there was to keep more money
in the bank, that also has the result
of reducing the bank's liability- ability to lend money.
Correct.
- Senator that's another example where a bank breached
a number of reporting issues on capital and liquidity
and also on stable funding.
We took action on the bank and part of that action
was the capital impost.
And I think the same answer applies that you have a bank
with a considerable capital and considerable ability to
lend commercially.
And in fact, in the case of Macquarie,
they have been lending very significantly into housing.
- [Senator Roberts] A third example, APRA takes,
this is the headline from October 20th.
APRA takes action against Bendigo and Adelaide bank
for breaching prudential standard on liquidity,
their penalty, well their consequence, was not a penalty.
Their consequence was to keep more money
in the bank, that also reduces their ability to lend.
- Senator, I think all three examples that you give
go to breaches of standards that apprehends
and as we've explained to the committee previously
we have an enforcement approach.
The adoption and compliance
with prudential standards is critically important
to safety and system safety for depositors in particular.
And so we need to
and have taken appropriate action, enforcement action
on each one of those cases.
And so that's what we've done.
- [Senator] Can I just clarify one thing, Senator?
So you keep referring about our actions, reduce the capacity
to lend and that's not, not quite right, what we do when
we're adding more capital to the bank effectively
we're changing the mix in which it uses either
its shareholders money or deposit as money to fund loans.
And the actions we take mean effectively that a bank has to
use more shareholders' money and less depositors' money to
fund a loan, but it doesn't actually stop the bank from
or reduce the bank's ability to lend.
It just says, use more of your shareholders money,
put- get your shareholders to put more
on the table and use less depositors money.
- Doesn't it make the bank reduces the bank's ability to
lend in that it makes
- Only if they don't have enough capital to meet
their regulatory requirements and then they have to stop.
But as John has said, these banks are running well
above their minimum regulatory requirements.
So the issue is really, it changes their
because capital is more expensive
than funding from depositors.
It makes their funding costs slightly higher.
- So the headline in the Reuters that,
well, the first paragraph,
the Australian bank regulator, APRA, said on Tuesday
it was forcing Westpac banking Corp
to raise its cash reserves,
after it fell short of prudential standards
its second enforcement action in a year
against the country's number three lender.
- So the effect
of what we did was to increase the minimum amount
of shareholders' money that we required Westpac to have.
- [Senator Roberts] Okay.
- But they use that money still to lend.
- I ask because in a meeting
of the responsible lending legislation with my staff
between my staff and treasury, treasury indicated
that is- a substantial reason
behind moving responsible lending regulation from ASIC
to APRA was because ASIC was imposing restrictions
on the bank's ability to lend.
But you'll argue
with this then that is exactly what we see that APRA doing,
is it not, because it's altering the liquidity?
- Well, I think we've already
answered that question Senator.
- So since the Royal commission, has APRA ever
launched an action against an ADI or bank that resulted
in a fine, a real penalty, not just complying with the law.
- Yes we have Senator.
And an example of that would be Westpac again
for a breach of reporting standards, a small fine
but it was the maximum fund that could be levied
under the FSCODA act.
- [Senator Roberts] What was the fine?
- It was from memory, 1.5 million.
- Isn't it amazing how 1.5 million
is a small fine these days (laughter)
but anyway
- Well we're talking about a major (indistinct)
(laughter)
- It is all relative
Does the national consumer credit protection amendment
supporting economic recovery bill 2020
allow APRA to find a bank that engages
in systemic breaches of the responsible lending guidelines.
- So no, no senator.
- Thank you.
What action is, is open
to APRA to regulate low dock home loans
which are provided for in that legislation.
- Well that, that is not something
within our responsibility Senator.
- Well, we could find none
- Senator Roberts we will need to wind up, sorry.
- Yep, I'm almost done.
What about all the people who lose their homes
their savings, their marriages, their mental health.
Is there no consideration for the human cost
of bad bank behaviour in this legislation?
- Senator, is that a question?
- Yes.
- If it is it's it's not a piece of legislation
that APRA has responsibility for Senator
- But you will have, or for responsible lending.
- No, that's not correct Senator.
- I thought you were getting,
going to have responsibility for responsible lending.
- What we have as explained earlier is we have
a standard prudential standard APS220
there are some very minor changes to that
and APRA's current stance in relation to how to
assist his credit will be pretty much the way it has been
for many years.
So no change
- Under the new legislation,
- We'll correct someone
- Thank you.
APRA runs the bank executive accountability
regime based scheme
which fines bank executives for bad banking behaviour.
You have taken action
against the banks for bad behaviour ASIC
and AUSTRAC have fined, have caused fines
on the banks of over $2 billion in the last three years.
How many of the executives in charge
of the banks have been personally fine through bear?
- I was going to say the bear doesn't give us
capacity to impose fines on individuals.
- None at all.
- That's not part of the legislative framework.
- Okay.
- Well last question
Jay Westpac are moving Knights, safe wallets
and advising their business customers to not accept cash.
Isn't that rule number one
for a bank except the Queen's currency.
On what basis are APRA allowing the banks to
make such fundamental
and illegal decisions without reference to APRA.
- Senator, APRA does not have particular standards
in place in terms of what commercial activities
banks undertake and services that they provide.
So, so they are commercial issues for the banks.
Thank you chair.
Thank you.
- Just on your last point though
I do think it is a little bit
of an issue if banks do indeed and I'm not saying
that Senator Roberts is necessarily correct
but banks refuse to accept legal tender
but I will leave that part there.
Thank you very much for your time.