Failure of consultation combined with last century ideology leads nowhere – just be cautious about the fix
COSBOA today acknowledged the seriousness of the interim report from the Banking Royal Commission and called for the urgent development of solutions that provide appropriate banking customer safeguards and banking industry transparency. There must also a banking and financial system that genuinely facilitates business growth and investment – not simply growth in the profit of banking shareholders and the pay packets of banking executives.
Within this context of business investment, we need to make sure that the ‘medicine is not worse than the illness’ by ensuring that the solutions to be put in place do not make it unduly hard for small business owners to secure the finance they need to continue to grow and employ ever increasing numbers of Australians.
Peter Strong, CEO of COSBOA, said today “The preliminary findings of the Hayne Royal Commission reflect many of the things that the majority of Australian business owners and bank customers have been saying for more than 20 years. That is, that the Australian banking system is fundamentally broken and is poorly monitored by under-resourced regulators”.
“There must be a change of attitude in the halls of policy makers - and in the corridors of power - that recognises that text book market theories and ideology inevitably only favours the ‘big and the greedy’.
“Even in the face of all this we continue to hear the catch cry of lazy ideologues - who have their heads buried in theory - that we should all “let the market decide”. Any reasonable thinking person would better say that “we must make sure the market can decide” - and then recommend responsible actions.”
Mr Strong said that “A fair and effective financial system is at the core of any economy – and is essential to support the reasonable investment needs of big and small business alike. Yet the Hayne Royal Commission has demonstrated our banking system is currently neither fair nor effective, with many examples of immoral and apparently unlawful practices of banking market participants - and patent ineffectiveness of the regulators to ensure fairness”.
“In seeking solutions, we must stay focussed on the need to ensure that the system is made fairer and more effective. This means that the fix cannot come at the cost of unduly restricting access to lending products of small businesses and households alike as a result of the regulators remaining under resourced”
COSBOA calls for the strengthening of the regulators by first ensuring that they are properly resourced and then ensuring that they ‘take their heads out of the textbooks’ and actually come out of their offices to speak and work with the customers of the banking system to develop a deeper understanding of our needs and safeguard requirements.
Mr Strong added “we work closely with many regulators. Indeed, we recently co-chaired a round table on Small Business Financing with the Governor of the Reserve Bank Philip Lowe. Yet still, in the financial sector we are engaged by only a few parts of ASIC; and APRA is an aloof organisation that lives on hubris and gives the small business community very little time or credit.
The good news, the very good news, is that over the last eighteen months we have had much better engagement not just with the RBA but with: the banks; the Australian Banking Association; and the new Chairman of ASIC and his Commissioner John Price. APRA is still basically missing from the consultation process.
The work of the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell and her staff, has also been vitally important in supporting the calls for a fairer financial system for small business owners – and its value cannot be overstated. Ms Carnell’s office will be even more important to make sure that any fix does not result in worse problems when it comes to accommodating small business needs in the financial system.”
Mr Strong also added “the experts on the financing of the small business community must always be consulted so that as solutions and changes are developed that any unintended consequences are few or non-existent. Consultation must be directed through Ms Carnell’s office and through COSBOA”