The Royal Commission Report into Misconduct in the Banking, Superannuation and Financial Services Industry will be released to the public this afternoon (4 February 2019). The Commission had already published an Interim Report in September 2018.
The Interim Report had hardly anything good to say about the industry. Rather, the Commission used the word “greed” to describe the industry’s behaviour and how the industry largely treated the ordinary customers. Otherwise, how can one explain fees charged for services not provided? Fees charged to dead people?
The Australian banking industry had been politically very successful for decades. In the post-GFC years, the industry used the excuse of ‘rising costs of funds’ in international markets for raising their interest rates asynchronous to the RBA’s rate decisions. Nobody raised an eyebrow when the major four banks reported record profits year after year while still crying poor about rising costs of funds. The crux of the matter is the banking industry fell into a culture of profit at any cost and bank executives’ remunerations were linked to profit and revenue. Thus, the bank executives in Australia all they cared for was whether they were contributing to the bank’s revenue and profit. Bank leaders did not care enough whether their employees were doing the right thing for their customers. If the bank management were thinking that they were more focused on creating shareholder wealth, shareholders thought differently. ANZ, NAB, and Westpac – all received a ‘first strike’ 2018 under Australia’s ‘two strikes’ rule. CBA received a ‘first strike’ in 2016.
So, the bottom line is: yes, we want our banks to be profitable and financially strong. Yes, we need strong banks for a strong economy. But the profit must be clean.
Reflections on development and governance 