Thursday, 27 October 2016
In Do we need a Royal Commission into the banks? (North Coast Voices 21st April 2016) I wrote: “What is very obvious is that there is a need to shine a very strong light on the banking/ finance industry in order to force the changes that are required to make it fairer and more responsive to customer needs. Moreover there is an ongoing need to ensure proper compensation for consumers who have been hurt by unscrupulous behaviour over recent years. And the “bad apples” in the sector need to be identified and removed. This would lead to a marked improvement in public confidence in the banking/finance system.”
What has changed in the six months since then?
Very little of substance. The returned Coalition Government continues to reject holding a Royal Commission into the banking/finance system while the ALP Opposition and the Greens continue to call for one. However, the Government has obviously been feeling under pressure on this matter. Although it still continues to rail contemptuously about the Opposition’s “populist” Royal Commission policy, it has abandoned its “do nothing” stance to take some limited action which it obviously hopes will neutralise Labor’s calls.
The first of these was a brief inquiry conducted by the ten member House of Representatives Standing Committee on Economics on October 4th -6th. (The composition of this Committee is: five Liberal MPs, one National, three Labor and one Green.) It was called by Prime Minister Turnbull after the major banks failed to pass on in full the Reserve Bank’s 0.25% rate cut to mortgage holders. Mr Turnbull said that it was an opportunity for the banks to explain how they deal with their customers, and why they make interest rate decisions and be open and accountable about it. It is significant that it was interest rates, not the many other really appalling actions of the banks over many years that produced this tepid inquiry.
The CEOs of the four major banks (Commonwealth, ANZ, National and Westpac) each spent three hours answering questions on matters such as bank policies, past mistakes, how these had been remedied and the action taken on those responsible for mistakes and illegal activities.
Some committee members were concerned about the very limited time available (around 20 minutes with each CEO for each member) which led to the question of whether CEOs would be willing to return for a further session. Deputy Chair of the Committee Matt Thistlethwaite (Labor) remarked that the twenty minutes he would be getting was farcical because he had two days’ worth of questions to put to the CEOs. Apparently those asked about returning expressed a willingness to do so – quite understandably given that this “inquiry” was obviously very preferable to a Royal Commission.
All CEOs were contrite about their banks’ past performances but claimed that the problems had been investigated (or were still being reviewed) and were (or would be) fixed. Obviously they believe that the Australian community should accept promises that the banks will put their own houses in order – something they have obviously not felt compelled to do in the past. The fact that many (if not most) of those responsible for the bad behaviour are still employed by the banks raises serious questions about bank culture and doubts about the banks’ commitment to improvement. There are many other issues which need more than vague promises about “doing better in future”. These include the lack of transparency, the lack of competition in the sector, the incentives which have encouraged predatory and illegal behaviour, and the inflated salaries rewarding the CEOs who are ultimately responsible for the culture and the bad behaviour.
The inadequacy of this brief and tepid inquiry was obvious even to the Government. Although still anxious to shield the banks from a really sweeping and effective inquiry, it has recently announced a further inquiry – a banking tribunal which it is claimed will be a low-cost way for victims of the banks to seek justice.
The Opposition has predictably seen it as yet another way to avoid a Royal Commission with Shadow Financial Services Minister Katy Gallagher claiming it was “all pre-determined and pre-agreed with the banks.”
What must be worrying the Government is that there is considerable public support for a Royal Commission and the paltry measures so far undertaken by the Government are unlikely to weaken this support. A national poll conducted by the Australia Institute in the second half of September found 68% supported a Royal Commission or similar inquiry and only 16% opposed it. Furthermore 52% of those surveyed believed that Prime Minister Turnbull was protecting the banks in refusing to call a Royal Commission. Only 21% disagreed.
This issue is not going to go away. The more the Government tries to defuse the situation with ad hoc measures such as the recent ineffective Parliamentary Committee inquiry and the promise of a banking tribunal, the more it is going to be seen as being out of touch with a very substantial part of the electorate.
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