Time for royal commission into banking
If you read the financial press, you would believe that Malcolm Turnbull excoriated the banks for their culture of greed this week.
That is because The Australian Financial Review wrote that “Malcolm Turnbull excoriated the banks for their culture of greed” after the prime minister’s speech at a lunch to mark Westpac’s 199th anniversary. The Australian reported that he “lashed the banks for poor conduct and for their pay practices”.
It is proof of the privileged relationship between banking and government that Turnbull’s wet lettucing could be described as anything so substantial. Nowhere did he choose to name specific malpractice. Nowhere did he offer any real threat. No royal commission into the sector, as Labor proposes. No return of the $120 million stripped out of the regulator’s budget by his predecessor, money that even an organisation as weak and ineffective as the Australian Securities and Investments Commission said would see its ability to fulfil its function “substantially reduced”.
What Turnbull said on Wednesday was this:
“The truth is that despite the public support offered at their time of need, our bankers have not always treated their customers as they should.
“Some, regrettably as we know, have taken advantage of fellow Australians and the savings they have spent a lifetime accumulating, seeking only dignity and independence in their retirement.
“Redressing wrongs is important especially where it is done promptly and generously.”
He talked in euphemism about “too many troubling instances”.
The day before, ASIC commenced proceedings against Westpac over the alleged rigging of interest rates between 2010 and 2012. In any other setting, this might dissuade a prime minister from lending the credibility of his office to their event. But banks are special. Similar proceedings are under way against ANZ. The Commonwealth Bank and NAB are both being investigated.
This is an industry depraved by greed. It is an industry in scandal, from unconscionable financial advice to rapacious insurance schemes. It is an industry that was guaranteed by the country during the global financial crisis, but out of that guarantee the government negotiated no greater levels of accountability.
The regulator is hopeless and under-resourced. Even before its budgets were cut, there were no outward signs that it was much worried about malfeasance. The work of investigation has been done by the press, and only occasionally followed by government.
On Wednesday, Nationals senator John Williams repeated his call for a royal commission into the sector. “It just goes on. When is it going to stop?” he said. “We get dog products, dog advice in a culture of profit, profit, profit and to hell with everyone’s security.”
Finance Minister Mathias Cormann immediately rejected the suggestion. “I would completely reject the proposal that we are letting white-collar crime get off easy.”
But a royal commission is needed. A sector this large, this mired in scandal, this close to government, this present in the lives of all cannot be left uninterrogated. It is not enough for a prime minister to attend their functions and speak the occasional but unenforced truth.
“Banks don’t just operate under a banking licence,” Turnbull said on Wednesday, “they operate under a social licence and that is underwritten by public confidence and trust.”
Turnbull is right. A royal commission would be a good place to start in auditing that underwriting.
This article was first published in the print edition of The Saturday Paper on Apr 9, 2016 as "Bank maraud". Subscribe here.