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Issue #1728      April 27, 2016

Editorial

Greed and deception – bank on it

Opposition leader Bill Shorten stunned the big banks and corporate media when he promised a Royal Commission into the banking sector. The Big Four, the most powerful institutions in Australia, see themselves as not only too big to fail but too big to be touched. Labor’s call follows that of the Australian Greens last year, which Labor had at the time opposed.

There have been 13 known serious incidents of financial services scandals and errors in the past two years alone. ABC’s Four Corners and Fairfax Media investigations have played an important role in revealing the callous, “profits at all cost” culture of the Big Four.

For example, on May 5, 2014, Adele Ferguson broke the story of the practices of a financial planner, whose annual salary was almost half a million dollars. The CBA protected him until a whistleblower and several of his clients fought back. (Banking Bad, a joint Four Corners/Fairfax investigation). The customers who believed they had been wronged had to take on both the bank and the industry cop, the Australian Securities and Investments Commission (ASIC), and they won.

CBA Chair David Turner promised: “We will be the ethical bank, the bank others look up to for honesty, transparency, decency, good management, openness.”

Then in 2016, a series of stories in the Fairfax media and on the ABC, culminating on March 7 with the ABC Four Corners program “Money for Nothing”, exposed another scandal, this time involving the CBA’s insurance arm Comminsure. The chief medical officer at Comminsure raised concerns internally about a culture where doctors were pressured to change medical reports, patients’ files were deleted and claims delayed in a deliberate strategy to avoid expensive pay-outs. Comminsure took action – they sacked him!

The motive was profits, every dollar not paid out, another dollar in profits.

The Big Four are amongst 14 banks being investigated for rigging benchmark interest rates (bank bill swap rates). ASIC began asking questions in 2012 and now has 10 of its 60 enforcement staff on the case. The Fair Work Building and Construction has a staff of around 146, and is recruiting more.

The banking cop is headed by former investment banker Greg Medcraft. Medcraft worked for the French bank Société Générale for 17 years – first as a financial analyst and later as its global head of securitisation. SG is a multinational banking and financial services company with total assets of €1.33 trillion (A$1.94 trillion). This is larger than Australia’s GDP of A$1.62 trillion (2015 figures).

“We will bring forward the review of the Code of Banking Practice. The Code of Banking Practice is the banking industry’s customer charter on best practice banking standards, disclosure and principles of conduct,” the ABA also promised. Whistle blowers will be protected (sic) and a register of “rogue advisers” established, the ABA said. The code is a toothless tiger, not legislation.

“Australia’s banks will continue to ensure customers are treated fairly and receive the best possible outcomes. Expanding ASIC’s role is complementary to this,” ABA Chief Executive Steven Münchenberg said. Such a statement – “continue to ensure” – hardly instils confidence that anything is about to change. (The promise of an additional $127 million over four years for ASIC basically restores the cuts made by the Coalition in the 2014 budget.)

When promising to abolish the Australian Building and Construction Commission, then Labor Deputy Prime Minister Julia Gillard told ABC’s Leigh Sales that there would still be “a tough cop on the beat with coercive powers to crack down on any bad behaviour.” (ABC Lateline 26-06-2009). The Fair Work Building and Construction (FWBC) that replaced the Australian Building and Construction Commission proved to be just that – a “tough cop on the beat”.

ASIC has not proved to be a “tough cop on the beat”. A government headed by a former merchant banker is not interested in exposing how the banks make such hefty profits, let alone addressing their lawlessness. It is not in the ruling class’s interests, whereas the FWBC is. The Communist Party says bring on the Royal Commission, but a serious one with wide terms of reference.

Next article – Royal Commission 25 years on – Still waiting for action

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