The Banking Royal Commission held in Australia should be seen as a turning point when it comes to ongoing reform of the sector – much needed as many financial institutions not only lose the confidence of their customers, but also the general public at large. For those who don’t know the history of how the Commission came about you don’t need to go too far back to know the previous Prime Minister, Malcolm Turnbull, and his then Treasurer (now Prime Minister), Scott Morrison, didn’t want a bar of it. In fact they thought that a few minor tinkering around the edges of the systems would be enough to both placate the public and the very people who ran the system. At one point a former Labour Premier from the State of Queensland also entered the fray. Anna Bourke would become the Bankers defender. This is the same former Premier who now says that “Our banks have failed in many ways. Failed customers, failed to obey the law and failed to meet community standards”. You would have course hated to have stated the obvious in relation to all of those things but then “failed the law”. No; on many occasions the law was broken.
Having called thew Royal Commission, after a barrage from the Opposition, the Government appointed a Royal Commissioner who, in turn, appointed a series of Queens Counsels. The latter would become the surprise package taking on witness after witness, unraveling sometimes complex and complicated deals, processes and procedures. But were they all that complicated and complex or has this all just been a listen in a system that has been left unchecked by regulators who are under resourced? Of a systems pushing the envelope to see just how far they could go?
In the case of AMP, one of the nations oldest and largest institutions the old adage of “There are lies, more damned lies ...” was the undoing. Reports were changed, edited and sections deleted to hide what might otherwise have been criminality.
The Chairman, the CEO and five other senior staff were forced out. The National Australia Bank may have misled the financial regulator, the Australian Securities and Investment Commission, over $35 million it owed customers after it was found to have charged a fee for no services and where the misuse of forms to forge signatures was rife. The CBA came under fire for breachers of consumer finance regulations and the creative ways it would often skirt the rules even when found to be in breach of them. There was of course the $300,000 donation over its CommInsure divisions advertisement rather than being struck with an $8 million fine and its word play when using that old parlor trick “don’t look here look over there” in modifying press releases.
ANZ didn’t miss the boat, nor did Westpac. Then there was the cowboy end of town with Dover Financial Planning, since closed, after significant misleading evidence presented to the Commission – impacting on a large portion of its customer base.
The punters, every day customers, from across the nation lined up. They talked about being misled, lied to, backed into corners. They talked about the financial and emotional toll conduct had bought to bear with some also saying they had gone so far as to attempt to take their lives. And, according to the Royal Commission greed played a significant role according to its interim report:
“Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained? But it is necessary then to go behind the particular events and ask how and why they came about.”
In fact, the Royal Commission has said we had moved into the ear of sell or be sold:
“Banks, and all financial services entities recognised that they sold services and products. Selling became their focus of attention. Too often it became the sole focus of attention. Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales.”
However; we don’t necessarily know how far the rabbit hole goes when it comes to misconduct and how long its been happening because the start date was only the 1st of January 2008 with two questions being posed to 61 financial services entities :
First, each entity was asked, in effect, whether it had identified any misconduct by the entity that had occurred at any time since 1 January 2008 and, if it had, to state ‘the nature, extent and effect of that misconduct’.
Second, each entity was asked whether it had identified ‘any conduct, practice, behaviour or business activity’ in which it had engaged since 1 January 2008 that it considered had fallen below community standards and expectations and again, if it had, to state the nature and effect of that conduct, practice, behaviour or activity.
Both the CBA and the NAB protested “that the task was too large and could not be completed with the time allowed...” whch should have been the first red flag where some of our largest institutions really had no idea. Eventually CBA provided, in the first round of hearings, a list identifying 139 breaches from subsidiary “Aussie Home Loans” and 309 of its own. NAB was in a much worse situation telling the Commission “that to provide details of misconduct that had occurred over the preceding five years it would have to look at, among other things, the Annual Compliance Statements it had made under the Code of Banking Practice (which recorded 1,914 breaches of the Code in the last five full financial years), 300 events reported as significant breaches to ASIC or APRA occurring during that period, 370 FOS determinations, 375 determinations by the Credit and Investments Ombudsman, 246 significant litigation matters and five different databases recording customer complaints.”
From those explanations the Commission realised it was on to something “Taken together, the course of events and the explanations proffered can lead only to the conclusion that neither CBA nor NAB could readily identify how, or to what extent, the entity as a whole was failing to comply with the law. And if that is right, neither the senior management nor the board of the entity could be given any single coherent picture of the nature or extent of failures of compliance; they could be given only a disjointed series of bits of information framed by reference to particular events.”
By the 31st of August the Public response to the Commission was significant. 8,646 forms had been submitted through the website, 5,500 emails and 3,200 phone calls were made. With the interim report now out it the question now becomes if the Commission should in fact go further and look before the start date of 2008 or if more public hearings should be had in response to the overwhelming feedback.
New Zealanders should probably be asking what about them? Given that all of the big four banks dominate the kiwi banking system and its insurers have a foot hold at the top of the kiwi market would it not stand to reason that something doesn’t quite smell right in the land of the long white cloud? At the very least the New Zealand authorities would want to ensure they learn any of the lessons of the Commission – especially given the number of kiwis running some of these institutions during the time under review.
Coming up next ... the recommendations and where to from here for Australia’s banking industry.
Matthew Tukaki is the Executive Chairman of NewsNow, Chair of Suicide Prevention Australia and from Head of Drake International and Chair of Deakin University CsaRO. Tukaki is a former Host of 2UE Radio’s Talking Lifestyle show “Second Career”.
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