Kate Carnell’s banking inquiry to draw on ASIC

The Australian, September 2, 2016:

The latest inquiry into alleged banking industry misconduct by the Small Business Ombudsman will draw extensively from the staffing and wider resources of the corporate watchdog.

Australian Small Business and Family Enterprise Ombudsman Kate Carnell confirmed yesterday she was hoping to recruit about six staff to undertake reviews of about 23 cases of alleged bank misconduct, with “one or two” to be seconded from the Australian Securities & Investments Commission because of their ­forensic skills and relevant experience.

The rest were likely to come from the Treasury and the private sector.

“This is not going to be bigger than Ben Hur; we’re focused on making a difference,” Ms Carnell told The Australian.

The Turnbull government announced the Carnell inquiry on Wednesday in a move to neutralise the Labor Party’s electorally popular proposal for a bank royal commission, and lock in the support of some coalition MPs who have previously backed a royal commission.

But the prospect of a royal commission into the sector remains a live issue. There were heated scenes in parliament yesterday as the federal government’s majority in the House of Representatives was challenged as the Labor Party tried to bring on a debate about the royal commission.

Bill Shorten said a probe was the last resort to obtain justice for those who had been let down by the banking system. “We may succeed tonight or not … we will never give up,” the Opposition Leader said.

One observer predicted Ms Carnell’s most demanding stakeholder would not be the Labor Party but the coalition MPs who have been pushing hard on behalf of some constituents for a re-examination of various bank misconduct cases.

Of the 20-30 small business matters to be investigated by the Small Business Ombudsman, some have been heard by the court system, ASIC, the Financial Ombudsman Service and/or various parliamentary committees.

The Small Business Ombudsman has said it has “royal commission powers”, including the ability to compel witnesses to appear and banks to produce documents.

While the cases have not yet been chosen, they will highlight inadequacies in the law.

Ms Carnell said they would be examined with “fresh eyes”, and not overseen by any ASIC officer who may have investigated them in the past.

The banks will also have an opportunity to be heard, and will be allowed to bring in lawyers.

“We won’t stop people bringing in lawyers but we’re not going to be lawyered-up or legalistic,” Ms Carnell said.

“We’re going to be small business-friendly and take an informal approach that’s not too difficult for people if they don’t have lawyers.”

Apart from a few key personnel, ASIC will hand over documents and other material concerning the investigations it undertook into the various matters. It will also make suggestions about law reform.

One of the areas likely to be examined is the significantly greater protection provided to retail borrowers compared to commercial borrowers, and the potential for some of those protections to be extended to small business owners.

Other systemic changes, which have been raised in parliamentary committee hearings, could result in customers gaining access to property valuation documents held by the banks.

A minimum notice period could also be required for any material changes in loan conditions. There’s also been strong criticism of the low thresholds required for the FOS to exercise its powers.

Ms Carnell said a range of issues could be fixed to level the playing field between banks and customers.

She is due to provide interim findings to the Ramsay review before handing over a final report to the government in 12 weeks.