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John Smith
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Banking inquiry: What have we learnt and where to from here?
The banking inquiry has laid bare a litany of examples of bad behaviour, with each of the big four plagued by their own separate scandals.
But we've actually learnt very little this week.
We heard of numerous incidents involving many tens of millions of dollars in "errors", unscrupulous financial advice, forged documents and a number of examples of "rockets and feathers" (interest rates shooting up like rockets when the RBA raises the official rate and falling slowly, like feathers, when the cash rate falls).
Almost all of these just happen to feed into the banks' record profits.
We also heard about scores of financial advisors (about 1 in 40 for ANZ and NAB) being unscrupulous, sacked or referred to the corporate regulator ASIC (but no managers or executives have been given marching orders).
And we heard of outrageous fees, enormous profit margins and whopping executive salaries.
But none of this is really new.
The most jaw-dropping news this week was revealed by ABC's 7.30 on Monday night — CBA's insurance arm ignoring a coroner's report and death certificate to avoid paying out a life insurance claim.
The biggest news from inside the inquiry was ANZ's revelation it was considering following NAB and stopping donations to the major political parties — if anything a display of the banks (not their political inquisitors) taking the moral high-ground.
Was it worth it?
The Government wouldn't admit it, but the inquiry was partly a show trial.
After all, it wasn't the long list of scandals that prompted the inquiry, but rather the most recent decision by the banks not to pass on the RBA rate cut in full. (It was also aimed at staving off Labor's calls for a royal commission.)
So the inquiry was set up, in part, to make all of us feel better by watching the big bank bosses squirm, and at times it delivered.
As the AFR's Laura Tingle tweeted: "Wouldn't it be more time efficient to just set up some stocks outside Parliament House?"
Each of the bosses offered separate mea culpas. The most striking admission came from ANZ boss Shayne Elliott, who said: "I think as an industry we've lost touch with our customers. We've become too internally focused and lost sight."
There were also a few awkward moments, as the chief executives revealed their salaries (millions) against those of their tellers (about $50,000).
But overwhelmingly, the chief executives proved why they earn those big bucks. The PR agencies that have been coaching them would have been chuffed.
Despite the best efforts of the 10 inquisitors, all skilful politicians, most trained lawyers, and one a former Commonwealth Public Prosecutor, the chief executives generally displayed the perfect balance of frankness, contrition and strength.
There were no killer blows.
So what will actually come of all this?
It was clear from chair David Coleman's questions the Government had reform in mind, even before the inquiry got underway.
The most significant is a banking tribunal. This would enable aggrieved customers to take complaints directly to an independent umpire, without having to hire lawyers and go up against the banks in the courts.
Interestingly, each of the bank bosses welcomed the idea, and even offered to help pay for the establishment of such a tribunal. It was almost as if they were fully briefed and their responses carefully coordinated.
The second reform would make it easier to switch banks, just like porting a mobile phone number. ASIC would be given powers to force banks to reveal the financial history of customers who wanted to go elsewhere, to make the process hassle-free.
The third would be encouraging (forcing?) banks to provide "tracking" variable mortgage accounts, that would move in line with the Reserve Bank.
The chief executives were generally sceptical, pointing out they'd have to factor in risk, meaning the rates would be significantly less attractive.
Do we need a royal commission?
Labor says yes — and many Australians would agree.
With each of the chief executives only grilled for three hours, the committee members had just 20 minutes to ask questions and most claimed there were many more left unasked and unanswered.
Indeed, the chief executives may be called to appear again before too long.
The very fact there were no killer blows is proof, according to some in Labor, that an inquiry with teeth is what's needed. (Conveniently, if there had been more explosive evidence, the case for a royal commission would have been even stronger.)
Bill Shorten said today: "If all of these banks are saying we stuffed up, we got it wrong, we have caused problems for our customers, haven't they just made the final argument in favour of a banking royal commission?"
Proponents of a royal commission have long pointed to the culture of incentive bonuses for bank staff who push financial products, sometimes to the detriment of customers.
But this inquiry revealed they actually get much less than you may have thought for sales and referrals. It's usually well under 5 per cent of their total pay.
There was also evidence the banks really are trying to improve, with considerable success.
Nonetheless, a royal commission would no-doubt uncover much more bad behaviour and drive much more cultural change.
(cont.)
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