‘Judgment day’ looms for Australia’s scandal-hit banks

Australia’s scandal-plagued banks are braced for “judgment day”, as a public inquiry into industry misconduct prepares to publish its initial findings after months of damning customer testimony.

The financial sector — including Australia’s all-powerful “big four” banks — faces a public backlash and the prospect of tighter regulations when an interim Royal Commission report is published before a Sunday deadline.

Firms like Commonwealth Bank, NAB, ANZ and Westpac are among the world’s most profitable financial institutions and largely avoided the shackles placed on US and European banks in the wake of the global financial crisis.

But a raft of reports of them issuing dodgy financial advice, life insurance and fraudulent mortgages forced a reluctant business-friendly government to call for a Royal Commission late last year.

Since then, a series of hearings involving almost 10 000 submissions and more than 100 witnesses has stunned even hardened observers.


They included accounts of NAB staff accepting cash-stuffed envelopes to pass dubious loans and help them “smash” sales targets, while staff at Commonwealth Bank —Australia’s largest firm —charged fees to customers who had died up to a decade before.

“This is a shocking wake-up call to the business community,” said the government’s former competition tsar Graeme Samuel.

The sector needs to admit that “something’s fundamentally wrong”, he told AFP.

The inquiry has already claimed several scalps, including the chairman of the country’s largest wealth manager AMP, who quit in April days after the chief executive stood down when it was revealed the firm charged clients for advice they never received.

Heroes to villains 

A decade ago the sector was lauded for emerging unscathed from the global financial crisis and avoiding the risky investments that doomed their peers.

Commentators say that successes may have bred complacency among banks as well as the government and regulators.

In Samuel and other analysts’ books, regulators had sufficient powers to reign in wayward banks — but failed to do so.

“We have to be aware that regulators do run serious risks of being captured by industry,” he said.

“It requires a strong discipline on the part of regulators to prevent it from occurring, so this will be a wake-up call.”

Recently installed Australian Securities and Investments Commission chairman James Shipton has vowed to bring about cultural change.

The agency on Tuesday released its own damning report finding “unacceptable delays” in banks’ reporting and addressing “significant breaches” of laws.

Major banks were taking an average time of 1 726 days — or more than 4.5 years — to identify significant breaches, ASIC found.

Even then, financial institutions took an average of 226 days from the end of their breach investigation to make the first payments to affected customers.

Shipton said the figures were a “sad indictment” of the sector.

More oversight and tighter rules are likely to be raised in the interim Royal Commission report, which has been dubbed the banks’ “judgement day” by some analysts and media.

The commissioner, former high court judge Kenneth Hayne, could also find the banks had breached civil and criminal provisions for alleged misconduct.

Most banks are already moving to spin off their financial advisory arms from their main activities to avoid conflicts of interest raised during the hearings.

One more round of hearings focusing on policy forums will run in November, with Hayne’s final report due by February 1 next year.

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Glenda Kwek
Glenda Kwek

Glenda Kwek is an AFP correspondent, Australia and former writer for the Business Day.

Related stories

Empire and environmentalism: The legacy of a brilliant maverick, Richard Grove

The prolific interdisciplinary scholar who worked on the periphery and challenged Eurocentrism also drew attention to the El Niño phenomenon and global warming concerns in Victorian times

Invest in children to give them a better world

This entails putting them at the centre of national strategies, but doing it without high CO2 releases

Digital banking offers an entry point to the fourth industrial revolution

Digital and mobile offerings have the potential to disrupt the banking industry in South Africa

Australia to force Google, Facebook to pay for news content

Australia's new regulations will also cover the sharing of data, and the ranking and display of news content, to be enforced by binding dispute resolution mechanisms and penalties

Olympics halt good for everyone

They took time, but the International Olympic Committee have finally done the responsible thing and postponed Tokyo 2020

Covid-19 regulations cause confusion for sheep shipment

Confusion about who should check a vessel meant to pick up 60 000 sheep has exposed fissures in the Covid-19 regulations
Advertising

Western Cape warned not to be complacent about flat-lining Covid-19...

The Western Cape, which once had the highest number of Covid-19 cases in South Africa, is seeing a steady decline in active cases

Sisulu axes another water board

Umgeni Water’s board in KwaZulu-Natal was appointed irregularly by her predecessor, the water and sanitation minister claims
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday