Calls for a Royal Commission into the behaviour of our biggest banks have been reactivated in the wake of ASIC’s decision to sue Westpac for rigging bank rates.
ASIC claims that Westpac was guilty of unconscionable conduct and market manipulation of the bank bill swap reference rate (BBSW) between 6 April 2010 and 6 June 2012 on 16 separate occasions.
Westpac is the second of the ‘Big Four’ banks to be charged by ASIC for this same offence, with proceedings against ANZ launched in March.
In the wake of previously reported financial misconduct by the Commonwealth Bank in its insurance division, CommInsure, which refused to pay many insurance claims, and the scandal in CBA’s financial planning division, as well as many previous ASIC enforceable undertakings against AMP, Macquarie Bank, ANZ and Westpac, ASIC Chairman Greg Medcraft has issued statements underlining the importance of culture in banking organisations. As recently as March, at the annual ASIC forum, he reinforced that the need for a strong, positive culture was a strategic priory for his organisation.
The Prime Minister Malcolm Turnbull also noted concerns about bank culture and behaviour at a Westpac 199th Birthday Bash last Tuesday, stating:
“Banks don’t just operate under a banking licence, they operate under a social licence and that is underwritten by public confidence and trust…” He then went on to ask: “Have our bankers done enough in return for this support? Have they lived up to the standards we expect, not just the laws we enact?”
On Friday the Labor Party announced a Royal Commission into financial services should it be elected.
Meanwhile National Party politicians including Warren Entsch and John Williams have also stated a Royal Commission is necessary.
Read more at www.asic.gov.au
There’s not much to like about our banks at the moment, is there? Rate rigging, avoidance of insurance payouts, fraudulent financial advice practices. It’s all going to hell in a hand basket. And with a regulator which insists that the answer is to help banks correct their ‘culture’, it makes me want to weep. Pardon the language, but stuff the culture – why can’t our major financial institutions obey our laws and suffer the consequences?
But the problem that lurks beneath this banking bad behaviour is not the over-abundance of overpaid guys in expensive suits using colourful language (“I know it’s completely wrong, but f**k it, I might as well, is the alleged statement by Colin Roden, the Westpac employee managing the BBSW), manipulating rates, furthering the banks’ already massive profits and feathering their own nests. This is criminal behaviour which can and should be dealt with.
The real problem is the millions of innocent victims, including you and me. Put simply, the recurring criminal activities of our major banks are having a massive negative impact upon the retirement income expectations for the majority of Australians.
This matters more than most commentators have noticed.
Each and every Australian with superannuation invested with one of the aforementioned banks should seriously review how much bang they are getting for their buck, as most customers of retail funds are paying higher fees, with the likelihood of lower returns, often for related insurance policies, which may not be honoured in times of need.
Let’s be clear that we are not talking about a few dollars here or there. Over the years Australian investors have had millions of dollars ripped out of their retirement savings by unscrupulous practices and advisors – think Storm Financial, Westpoint and more recently the CBA’s financial planning division. The fees paid to manage our superannuation have been ranked the third highest in the world by the OECD. When high fees are extrapolated into eventual retirement savings, the difference can amount to tens of thousands of dollars – the difference between a comfortable retirement or decades of penury.
So what can or should be done about the behaviour of our big banks?
An awful lot, is the short answer.
Federal Parliament is currently being recalled to consider legislation to crack down on alleged corrupt practices in the building and construction sector. It is also being asked to delay legislation requiring higher pay for truck drivers, designed to reduce road deaths.
These measures pertain to specific sectors of the economy and some might even say that these policies are ideologically driven by a conservative government.
But despite repeated calls for a Royal Commission into our financial sector, the superannuation portion of which represents $2 Trillion, the current government remains steadfast in its refusal to shine a light on an ongoing series of serious financial crimes carried out within this industry.
Worse still, bank employees who reveal malpractice have been sacked, but those who are under investigation by the regulator seem to escape censure, with their employers stating that they are ‘standing by their staffers’. Ironically, the major bad egg in the Commonwealth Financial Services scandal is receiving payouts from CommInsure. Yes, seriously. Don Nguyen’s claim appears to have passed muster, while other real victims are left begging for crumbs.
So the simple solution is to call a Royal Commission, with the powers to subpoena any witnesses, immediately. Without one, as Fairfax investigative journalist Adele Ferguson has noted, all recommendations will end up in a dusty draw. We don’t need more weasel words around the importance of culture. We need action to punish those who break our financial regulations. And recommendations which finally address the structure of remuneration and incentives which encourages people like Westpac manager Colin Roden to say “F**k it, I might as well” at the expense of many other peoples’ life-long savings.
What do you think? Are the banks truly behaving so badly a Royal Commission is needed to investigate ways of forcing them back into line? Or are these mere misdemeanours best handled in other ways? Would you like to see the guilty parties behind bars?