The jig is up, time to bring banks to justice

‘This has been a systematic, long-term culture of breaking the law.’

The jig is up, time to bring banks to justice

Wow. They have finally been dragged kicking and screaming to an inquiry. At long last we will find out what there was to hide. But not before most Australians’ retirement savings have been significantly reduced by outrageously poor financial regulation.

This morning’s call by Australia’s Big Four banks for an inquiry has been an awfully long time coming. For years, since the Storm financial debacle during the Global Financial Crisis (GFC) of 2008, those with an interest in ethical financial practices have asked for a deeper inquiry into the banking and finance sector. In reality, there were very few institutions or individuals in Australia and overseas who were actually prosecuted for breaking the financial sector’s laws during the GFC. And many commentators have been wondering if we are building up to another such crisis as so little has changed in the behaviours of our banking institutions. And while we use the term “bank”, the top four banks are active right across the financial services sector, in lending, insurance, superannuation and financial advice. They are so much more than banks, and thus the full range of their associated activities must now be scrutinised.

In particular, the banks’ ownership of a significant proportion of retail superannuation funds, often sold by their own employees in their roles as financial advisors, has led to a “Dracula in charge of the blood bank” scenario, where such employees cannot possibly recommend competitors’ funds. This has been revealed in ASIC shadow shopping exercises where most bank employees simply recommend their own product, even though it shows lower returns. And these so-called “advisors” are bound by law to have their clients’ best interests at heart. Similarly, with the sale of insurance, whereby customers of large banks were tipped into those banks’ own insurance products, only to find the insurer wiggled out of honouring the policy when they became ill or passed away.

All this and more has been revealed over time by diligent journalists and brave whistleblowers who risked their jobs and reputations to shine a light on – no, NOT bad behaviour – but crime. We are not talking about naughty children here, although the banking sector and conservative politicians, who have resisted this inquiry, love to frame the debate in terms of mere “misconduct” as if the staff concerned were just having a bad day. This is not about “misdemeanours”. This is a systematic, long-term culture of breaking the law. It is about ignoring the many regulations put in place by ASIC and APRA, which are meant to ensure the customer’s interests are the primary concern when it comes to financial advice and investments. And sadly, both these regulators have failed to act when necessary, choosing instead to plead with the big financial institutions to change their ‘culture’ rather than taking them to court.

The result for Australia’s 4.5 million retirees is obvious. Out of all OECD nations, Australians pay the third highest fees in superannuation. These fees are often complex, and layered, for example not just as a management fee for funds invested, but also for changing investment preferences. Thus the final retirement nest egg for many super fund members is significantly reduced by unnecessarily high fees. Add this to the awful truth that those retirees who have accepted the investment advice from a financial planner from one of the Big Four banks are highly likely to have had their savings automatically directed into the bank-owned retail funds, which over the long term (decades) have delivered lower returns.

The sad fact is that, instead of hitting this unethical and, in many cases, illegal behaviour hard, and using their scarce resources to help consumers understand the unnecessarily complex landscape of retirement savings, our regulators have sat by, metaphorically wringing their hands and mouthing platitudes.

As they say in the classics, the jig is now up! The groundswell of discontent, over years of big banks rorting the consumer, has now erupted into a call for a comprehensive investigation of how we ever got to this sad situation – a call that can no longer be ignored. As an advocate for a fairer system for all Australian retirees, YourLifeChoices has supported the call for such an inquiry for years.

It’s time to bring it on.

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    COMMENTS

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    Golden Oldie
    30th Nov 2017
    5:37pm
    How good is the Royal Commission going to be. The SSM non-binding vote just done was $122 million. The Royal Commission is supposed to cover everything for $75 million. Something fishy and smells if we expect a thorough investigation.
    Anonymous
    30th Nov 2017
    6:56pm
    Agreed. Watch the cost blow out. The banks deserve to be crucified and roasted. they should be forced to make financial recompense.
    MICK
    30th Nov 2017
    10:51pm
    Lets wait for the fat lady to sing Kaye. The RC will likely be a watered down RC to make it look legit when it is another wallpaper job. Never underestimate the Turnbull cronies to avoid a genuine inquiry.
    Regulators? Failed institutions run by professional BS and escape artists. Many of the management need to lose their jobs and be replaced with those who a proper job rather than keep a job.

    1st Dec 2017
    8:38am
    denise brailey has been calling for a royal commission into australia's banking industry for over a decade. she now says that this royal comission will be controlled by the bankers themselves. it will be a whitewash.


    she says "The Banks are trying to minimize the bank scandal damage by having a complicit Treasurer and LNP draft the TOR, not the ALP and completing the RC before the next election. The ALP cannot expand on TOR. Banks have ensured the RC is only a probe into "error or maladministration" and not into Cartel criminal activity and the key words are INTENTION TO DECEIVE. The calculator was an intentional TOOL to skew every income from fact to fiction. These are criminal "errors."
    http://www.bfcsa.com.au/index.php/entry/bfcsa-exclusive-the-turnbull-royal-commission-will-be-run-and-controlled-by-the-bankers
    Kaye Fallick
    1st Dec 2017
    9:04am
    Agree re Denise Brailey Kika - she has done a great job over a long time
    Anonymous
    1st Dec 2017
    7:45pm
    Rubbish
    Royal commissions are independent
    Phil
    1st Dec 2017
    2:12pm
    Royal Commission or Right Royal Whitewash? It all depends on the appointees and the Terms of Reference. Remind me, who appoints the commissioners and who writes their Terms of Reference? Oh yes the government of the day!

    Oh look over there! It's silly Sam caught in the headlights!

    1st Dec 2017
    6:02pm
    All you Bank knockers are going to be bitterly disappointed when you find out that our banks are world class institutions and operate very well
    Sure we can tinker around the endges and improve as can any business or government department .
    But all in all our banks will come out looking good and you will find that all the bank bashing was nothing but political game playing by Labor and Greens
    neil
    1st Dec 2017
    7:11pm
    Will the Banks reckless gambling debts of 100's of billions of dollars trading derivatives be exposed.
    Will the public be told about APRAs current bill put to Parliament last week for the Banks to be able use all of depositors funds to "bail in the to big to fail Banks"when the S..t hits the fan when the housing bubble breaks and there gambling debts need to repaid and GFC 2 hits because of their reckless, stupid, moronic behaviour of the worlds Banking system
    Have you read the fine print on the deposit guarantee as to how much the Government will honour from each bank, think it is about 20 Billion and each of the 4 Banks has over $250B on deposit, EACH
    So how much of this will be exposed by a Government enquiry, after all the Banks, I feel own the Goverment or a dam lot of it
    Will we be told about the way they lend out money, fractional reserve Banking, you put $1 in the bank and they lend it out at a min $10++++, up to $30 pre GFC 1, and charge you 5% ++ interest, which is just plan robbery of the Australian public.
    All this information is available on the net if you are at least a little bit interested in what is really going on.
    WAKE UP SHEEPLE!!!!!!!
    anonysubscribe
    2nd Dec 2017
    2:46pm
    FOS was a horribly hypocritical biased incompetent mediator with negligent mediators who made sure the 3 cases I raised were unfairly decided. Their terms of reference prevent appeals on law or fact! My 3 cases were against a financial planner who created a stupid investment scheme (like Storm's) but the mediator ignored all his lapses and then reduced my payout because he opined that I could be considered a sophisticated investor. There is no such legal category but the mediator's decision was final. 2 I won a case against a timeshare but on flimsy grounds which other mediators did not use to help me even when I raised them validly in my other 2 cases. The timeshare accounts were adversely certified by their auditor and the mediator cunningly ignored that and let me win on flimsy grounds which I did not raise. Fraud was ignored so that the FOS 'member' could get away with fleecing thousands of other victims for the rest of their lives. 3 A broker traded for me and lost lots of money. FOS again reduced any compensation. FOS is spineless. Stupid. Even when I painstakingly pointed out the facts and law to them in my crude way, they just ignored it. I complained to ASIC and the minster (labour at the time) but they ignored me.
    mike
    2nd Dec 2017
    7:01pm
    Turnbull is determined to destroy our CBA and other major banks, but dont forget its our banks that kept Australia safe during the GFC, and also all of our Super is in the banks and of course all the mum and dad shareholders/ OH well, when the banks fail, as they will if Turnbull gets his way, we can always go on the pension


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