Liberal MP for Goldstein, Tim Wilson, who is chair of the House of Representatives standing committee on economics, has asked ME Bank, the Australian Securities and Investments Commission (ASIC), and the Australian Prudential Regulation Authority (APRA) to attend a second “urgent public hearing” by video conference today (3 June 2020) as part of the committee’s ongoing review of the four major banks and other financial institutions.
Mr Wilson had previously asked the corporate regulator if the bank had presented accurate evidence to the committee when it appeared two weeks ago for an emergency hearing after the bank changed redraw minimums on home loan products without notifying customers in advance.
The redraw facility allows customers to deposit money ahead of their loan repayment schedule, with the cash also being able to be withdrawn – but the bank had decided to reduce its redraw limits in fear of customers falling behind on home loans.
After initial media reports broke of the ASIC response on Monday (1 June), Mr Wilson posted the letter from Mr Shipton on Twitter, which said that ME Bank chief executive Jamie McPhee had not fully reflected the extent of the bank’s communication with ASIC on the redraw issue.
“@ASICMedia replied to my letter re if @MEBank CEO [Jamie McPhee’s] evidence the [House] Eco Committee was accurate re closing redraws without consultation. In short: no,” Mr Wilson tweeted.
“So, I’m directing the secretariat to recall the bank and ASIC this [Wednesday].”
Who knew what, and when?
Mr McPhee’s statement had indicated that ASIC had only notified the bank that it received the information when ME Bank alerted the regulator of a redraw issue.
But Mr Shipton wrote that, after ASIC was notified, it discussed the issue with ME Bank in a meeting and had sought further updates.
According to a timeline provided by Mr Shipton, ME Bank had submitted a self-report to ASIC’s Misconduct and Breach Reporting (M&BR) team regarding the occurrence of a redraw issue on 10 December. It was not a formal breach report under the Corporations Act.
On 18 December, ME Bank representatives, including Mr McPhee, met with ASIC’s Financial Services Group (FSG) for a six-monthly meeting, where the issue of the redraw was raised and discussed.
During the meeting, Mr Shipton said the FSG team had noted “it was important that ME Bank communicated effectively with customers to explain why these changes were being made, i.e. to fix a system problem”.
The bank was said to advise that a remediation and communications plan was being developed and updates would be provided to ASIC.
At the end of March, the regulator’s M&BR team requested an update on the issue, with ME Bank complying approximately two weeks later. The regulator then sought further clarification on ME Bank’s update and the bank gave a response on 23 April.
From 23 to 27 April, the bank made adjustments to customer redraw facilities, as part of its treatment plan for the issue, but following media coverage saw a public outcry, with speculation that customers were having their access to cash minimised during the COVID-19 crisis.
ME Bank then reversed out of the policy change for customers who wanted it and Mr McPhee publicly apologised, stating: “We are deeply sorry. We were trying to do the right thing, but we went about it the wrong way.”
But during the December meeting and prior updates, Mr Shipton said: “There was no further opportunity for ASIC to raise concerns around ME Bank’s remediation and communication strategy before the bank made adjustments to customers’ redraw facilities… because they started making changes to redraw amounts on the same day as their clarification to M&BR.”
ASIC reported that since 3 May, it has been in regular contact with ME Bank. It has also had discussions with APRA, with Mr Shipton saying it would continue to do so until the matter was resolved.
“ASIC has raised this inconsistency in Mr McPhee’s statements with ME Bank, and understands that ME Bank intends to correct the record in their responses to further questions the committee has raised with ME Bank directly,” Mr Shipton’s letter stated.
‘Discrepancy is deeply concerning and requires further scrutiny’
Mr Wilson has now asked the bank, ASIC and APRA to appear via video conference today at 12pm to answer further questions.
Noting that the committee has sought information from APRA and ASIC on ME Bank’s conduct and engagement with the regulators on this issue, he added: “The discrepancy between ME Bank’s evidence to the committee and advice from ASIC is deeply concerning and requires further scrutiny.”
[Related: ME Bank CEO stands by redraw decision]