Chris Bowen will listen, but he’s been “around the track”, as he puts it, enough times not to be swayed by a lobby fuelled solely by self-interest.
While he’s not the treasurer in power, shadow treasurer Chris Bowen’s views on policy and regulation at this most critical juncture for the financial services industry carry as much weight as anyone’s in Canberra at the moment.
Since the swing away from the Liberal Party in former prime minister Malcolm Turnbull’s seat of Wentworth in October, industry and political pundits have begun to contemplate the possibility of a change in government. Either way, there will be an election soon – one must be held by May next year.
In Bowen, the financial services industry should expect a seasoned politician who has learned from the times he has locked horns with lobbyists.
Bowen has seen it and heard it all before. If Labor does what many think it can do and wrests power from the beleaguered Liberal Party next year, Bowen will be in the hot seat, responsible for oversight of the regulators and possibly – depending on the timing – implementing Commissioner Kenneth Hayne’s final report.
While Bowen was cautious not to front run Kenneth Hayne’s recommendations, his comments in this exclusive interview with Investment Magazine are particularly illuminating when it comes to the blurring of the lines of regulator responsibilities and the watching brief he’s keeping on vertical integration.
Implementing Hayne’s recommendations
Alice Uribe: What would a pathway to implementation of the Hayne royal commission’s final recommendations look like from a Labor government?
Chris Bowen: You could actually read the interim report in a number of ways. I’ve said this previously – and I say it carefully because I don’t want to be critical of the royal commissioner – but I think it would have been more prudent to have draft recommendations in the interim report because that way we could all see them, comment on them, point out potential unintended consequences.
It appears we won’t have that, so it appears that the final report will include recommendations that we’ll see for the first time – government, opposition, the sector, everybody…and a government of either persuasion will implement the recommendations. I think that’s a given.
AU: Both parties will implement all recommendations in totality, is that what you think?
CB: I think so, yes. There are genuine questions around timing and implementation details. I would think it unlikely that [Hayne’s] recommendations would be so prescriptive that there wouldn’t be a good deal of work for a Treasurer and a government to do around implementing them.
Conflicts and vertical integration
AU: What is your view on whether vertical integration should be legislated out of existence?
CB: Several banks are already dropping it, of course. You’d have to say banks are reading the writing on the wall. I know that Westpac has said that it won’t but the others, by and large, have been.
AU: Ahead of the royal commission’s final recommendations, institutions are negotiating, in some cases, 20-year distribution agreements with vendors they’ve sold their wealth and asset management businesses to, isn’t this just vertical integration at arms-length?
CB: I think that’s a legitimate question but, again, this is why I was very cautious to start with because I really do want to see what he recommends first.
The political environment
AU: How has the feeling within the Labor Party changed since the Liberal Party’s leadership spill in August?
CB: You’d rather be in our position than in their position. You would have rather been in our position than theirs before they spilled and you’d rather be in our position than theirs after.
AU: Do you feel vindication for having called for the banking royal commission from the start?
CB: Justification perhaps. It’s vindication in the sense that our policy concerns – our reason for calling the royal commission – has been ticked by history. But I wouldn’t say vindication in some sort of brutal political sense. It was a tough decision to call the royal commission and we didn’t do it lightly. We knew that it would at that point be politically controversial and we knew that we’d receive all sorts of incoming criticism from the sector, saying we were creating uncertainty and that it’s bad for investment.
But we thought it was justified. Not even we expected the scale and the speed, and the effect, of the findings…It surprised even me and I thought it was justified and necessary.
AU: What are your top takeaways from the royal commission hearings and findings?
CB: In a very broad sense it’s just the fact so many people thought that bad conduct was OK. The question really became ‘How did we get here?’ The fact enough people thought that this was all right, that’s what really saddens me, without getting into the specifics…I wish it had been done two years ago when we called for it because now the sector would be getting on with it in terms of implementing the recommendations and moving on.
Regulation of superannuation
AU: With more than a third of all of Australia’s retirement savings in SMSFs, do you think there’s an argument to shift oversight from the Australian Tax Office, which is principally a revenue collection agency to, say, an APRA-style of regulation?
CB: There’s speculation about that. When it comes to regulatory frameworks, I’ve seen it speculated that Hayne might recommend a specific regulator for superannuation as opposed to self-managed super. [The speculation has been] to keep ASIC and APRA but remove superannuation from them and have a regulator covering just the field of superannuation.
AU: Do you see value in having a separate regulator for superannuation?
CB: I think more broadly on regulation… In the ‘twin peaks’ model of regulation we’ve had historically, we’re all pretty clear about who does what; we’re all pretty clear traditionally about the roles of each of the regulators. I think we’ve lost quite a bit of that through ad hocery. So, for example, BEAR [the Banking Executive Accountability Regime] has gone to APRA. Now, I think there’s at least an argument that BEAR sits better with ASIC, right?
AU: The Productivity Commission’s recommendation for a so-called “best in show” superannuation fund shortlist have gotten a mixed response. What are your thoughts?
CB: I’m not a fan of ‘best in show’. I think that it has, again, perhaps unintended consequences. I don’t think it’s great for competition to have 10 funds and only 10 funds; I think that’s potentially anticompetitive. I was on the platform with Karen Chester [deputy chair of the Productivity Commission] when she…sort of signalled that they might be moving away from it. I won’t second-guess her…we’ll know soon enough. But a Productivity Commission report is not like a royal commission; it’s not that, you know, you should assume that every recommendation will be implemented. And I saw Stuart Robert [assistant treasurer]…saying that he wasn’t impressed with ‘best in show’; I think he called it “dead”.