Don’t hold us back, big four banks warn parliamentary inquiry
POLITICIANS responding to public fury at banking’s big four need to realise the threat of criminal prosecution is not “the answer to everything”, according to Westpac chief Brian Hartzer.
A heavy handed approach could instead undermine the risk-taking that is driving Australia’s economic growth, Mr Hartzer says.
The last of the big four bank bosses to appear before this week’s parliamentary inquiry, the Westpac chief told the House of Representatives Standing Committee on Economics yesterday that good financial advisers could become unintentional victims of a proposal to crack down on perpetrators of dodgy advice.
Those advisers, he said, could take a more conservative approach to investing for fear of prosecution should they lose client cash.
Taking risks, he said, was an inevitable facet of investing.
“If you try to run everything on the basis of rules and punishment you risk slowing innovation,” he said.
“The answer to everything is not the threat of criminal prosecution.”
Mr Hartzer also responded to the concept of introducing a banking tribunal for customers to air grievances, saying it would be good to “simplify” for customers.
But he cautioned against simply adding “another layer” of regulation.
Earlier in the day, National Australia Bank chief Andrew Thorburn also backed a tribunal.
Mr Thorburn told parliamentarians NAB had recently walked away from political donations to major parties as he felt they were being misconstrued by the public.
“(In order to be seen as) clean, direct and decisive, our board decided to stop making such payments to political parties at Commonwealth, state and local level,” he said. “And so we are going to use our credibility and strength and currency as a bank, not have it potentially misconstrued as payments being made for untoward reasons.”
But Mr Hartzer told the panel while Westpac did not contribute directly to parties he had no plan of ceasing donating to attend events.
“Our policy is very clear and we don’t have any plans to change it.”
The committee questioned why Westpac took the longest of all the banks to pass interest rate cuts on to mortgageholders — with a full 20-day delay in August that experts said earned the bank $28.2 million.
Mr Hartzer said rates did not directly relate to how banks funded themselves, saying its base came from a large pool.
“We don’t fund off the cash rate,” he said. “Ours is a mix of longer term deposits, wholesale offshore borrowings and the like.”
Mr Thorburn warned the committee Melbourne’s apartment market was one of the 50 “high-risk” postcodes in Australia when questioned on the state of lending.
NAB chief operating officer Antony Cahill agreed, saying while NAB only had 2 per cent exposure on its loanbook to inner-city apartments, there were concerns about Asian lenders driving the boom.
Mr Thorburn rebuffed ANZ chief Shayne Elliott’s assertion earlier in the week that banks could offer better credit card rates, saying NAB’s cards unit had some of the “highest losses in our portfolio”.
And Westpac’s Mr Hartzer warned against “tracker” mortgages — products that ape moves in the official cash rate — saying they created risk in the system, particularly during the global financial crisis.