House of Representatives Standing Committee on Economics - BOQ's Opening Statement
Friday, 29 November 2019
I would like to thank the Chairman and the Committee for the opportunity to appear before you today.
As you would be aware, I recently joined the Bank as its new CEO.
Let me assure the committee that good customer service and good customer outcomes are very important to me and to BOQ.
Having people in our communities own and manage our branches means we are genuinely connected into community sentiment and we fully understand the importance of the Royal Commission’s recommendations.
From BOQ’s perspective, Commissioner Hayne identified a range of behaviours in the industry that he was right to call out as unacceptable – and his recommendations are being implemented as a matter of priority in BOQ.
Understanding the terms of reference of this Committee and its particular focus, we can inform the Committee that:
- Regarding recommended changes to the Banking Code, while these are not scheduled to take effect until 1 March 2020, we are looking at areas where we can move more quickly, including providing easier access to banking.
- In relation to agricultural lending, while we can and will make further improvements to help farmers, our current practice is that distressed loans are managed by experienced agricultural bankers, we always offer our customers farm debt mediation and the appointment of receivers should only ever be a last resort.
- We are on track with the Sedgwick Review’s recommendations. Importantly, our frontline retail staff have already moved onto balanced scorecards, and we will be fully Sedgwick compliant by 1 September 2020.
- This year we introduced a new purpose and values to ensure that they better reflect the behaviours we aspire towards and are something we can be proud of.
- Like many other banks, BOQ also recently undertook a comprehensive culture and governance review, and the recommendations from that review will further strengthen governance frameworks within our business.
The Royal Commission has focused on delivering better customer outcomes by reviewing misconduct.
We also believe there is merit in talking about further customer-focused reform opportunities.
Increased competition and access to banking services also improves customer outcomes and from a small bank perspective, we believe three key reforms could be further considered:
- While no one is arguing for beneficial treatment, smaller banks should be allowed to use covered bonds for a greater proportion of their funding base to help address the cost advantage the majors enjoy by being considered “too big to fail”, with implicit sovereign backing.
- Secondly, we welcome the fact that APRA has reduced the relative capital disadvantage of non-major banks. However, we believe the capital framework needs further reform to reduce the substantial gap between the amount of capital that small banks need to hold relative to major banks, against the same low-risk residential mortgages.
- And thirdly, given available resources, regulation should be implemented on a staggered timetable, providing smaller banks with longer timeframes, similar to the welcomed approach adopted by the Government in relation to Open Banking and the BEAR regime. There may also be opportunities for new regulation to be introduced in a proportionate manner that recognises the simpler business models of smaller banks.
This is not about imposing additional barriers or burdens on the major banks, as that would just see additional costs flow through to the millions of Australians who bank with them. Rather, we want to see the regulatory and prudential barriers removed that make it harder for smaller banks to offer the innovative, dynamic and competitively priced products to our customers that we know they deserve.
Once again, thank you for your invitation to appear. Our Chief Risk Officer, Adam McAnalen, and I look forward to your questions on these issues or any other matters. Thank you.