Westpac, ANZ face tough questions over mortgage pricing

The House of Representatives Standing Committee on Economics is conducting further public hearings this month with Australia’s four major banks as part of its ongoing scrutiny.

On 11 October 2017, the committee will hear from Westpac and ANZ banks.

The committee’s First Report was published in November 2016, following on from the initial public hearings in October 2016. The committee affirmed the 10 recommendations of its November Report in April 2017, following on from the further public hearings held in March of this year.

In the May Budget, the government broadly adopted nine of the committee’s 10 recommendations.

Recommendations adopted by the government relating to the banking sector include a one-stop shop for consumer complaints, a regulated executive accountability regime, and new powers and resources for the ACCC in investigating competition issues in the setting of interest rates.

The committee’s mandate from the government to review the banking sector is ongoing. The chair of the committee, Mr David Coleman, MP, stated that “these hearings provide an important mechanism to hold the four major banks to account before the Parliament.”

APRA and ASIC were hauled before the committee last month, where they were grilled over investor and interest-only lending curbs and the impact these have had on the market.

The two regulatory bodies gave very different responses over whether CBA’s reasons, which it claimed were “regulatory requirements”, were valid for a 30 basis point increase on existing mortgages.

APRA chairman Wayne Byres deflected the question, telling the committee on 13 September that he was eager to hear what ASIC and the ACCC had to say on the matter.

The following day, ASIC chairman Greg Medcraft responded affirmatively when asked if CBA has “a lot of skeletons”.

“The four major bank CEOs will be before Parliament, and I suspect they will be asked the same questions,” said Steve Weston, who held a number of senior leadership positions at major banks in Australia and the UK. His most recent role was CEO of mortgages at Barclays in the UK.

“If they are found to have misled consumers about their reasons for lifting their back books as is being suggested, they may then be asked what else they have been disingenuous about,” Mr Weston told Mortgage Business. “This could be a pivotal moment for banking in Australia.”

A major turning point for Australian banking this year was the Turnbull government’s decision to beef up regulator powers through the Banking Executive Accountability Regime (BEAR).

ASIC’s Mr Medcraft told the parliamentary committee last month that BEAR “is a very good starting point” but is part of a “journey” on ongoing regulation similar to what has been implemented in the UK.

He explained that the accountability regime will require management to demonstrate that they took reasonable steps to stop something [that is] going wrong, as opposed to pleading ignorance.

[Related: Banks are facing an 'iceberg of issues', says former exec]