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Issue #1752      October 12, 2016

Thick as thieves

The appearance of the CEOs of Australia’s Big Four banks last week before the House of Representatives Economics Committee was a charade from start to finish. One by one the CEOs lined up to be questioned about the behaviour of their bank, the scandals, what action they had taken to rectify injustices and illegal practices, and why all too often no one had been sacked.

The CEOs were questioned on exorbitant credit card and mortgage rates, bank bill swap rates, refusal to pay insurance claims, financial planning scandals, remuneration of financial planners, lack of independence of financial advice and massive profits on different products and other concerns.

The stock reply from each bank was to sound apologetic for the actions of individuals; to reassure the MPs that thorough internal investigations had been carried out; that any necessary changes had been made; and that criminal and unethical practices were not systemic or related in any way to the bank’s culture.

“Poor outcomes sometimes come from human error. No one company or individual is perfect,” said Commonwealth Bank CEO Ian Narev, playing down the seriousness and systemic nature of some of these “poor outcomes”.

“We will ensure that we put our mistakes right and learn from them,” he added.

The message: No Royal Commission!

The ANZ, Westpac and National Bank of Australia all sang a similar tune.

The CEOs tried to win friends and sooth public anger by acknowledging some mistakes and illegal activity. They went through the motions.

Too big to touch

The Big Four between them have over $2.5 trillion in assets under management, either directly or through their subsidiaries. This is approximately 140 percent the size of Australia’s GDP. The wealth managed by the Big Four is almost six times as much as the $418 billion the government spent in 2015.

Along with management of such massive amounts of wealth comes power. The sort of power only enjoyed by some of the big insurance companies like AMP and to a lesser extent the mining magnates.

So it is not surprising that the CEOs didn’t feel threatened by this, the first annual review of Australia’s four major banks – Turnbull’s alternative to a Royal Commission. The Fairfax media headline “Money Talks” summed it up.

Prime Minister Malcolm Turnbull announced the holding of annual reviews in a desperate attempt to stave off calls for a Royal Commission into banking. We are supposed to believe that it will make the Big Four publicly accountable?

Farce

Murdoch’s Australian newspaper described the review as a “damp squid” and “truly pathetic”. But it was not referring to the damp and pathetic failure of CEOs to take the hearings seriously but to the parliamentarians’ questions!

The Australian’s coverage could be described as “truly pathetic”, playing up diversions from the key issues, in effect covering up for the banks and their actions. Transferable accounts, tribunals, etc will not address the criminal and unconscionable conduct of banks.

“… it is through the combination of strength and fairness that we build and sustain trust,” Narev told the review panel.

“… we have also needed to balance the interests of many stakeholders in a way that is fair and that is seen to be fair,” Narev said.

It is this question of “balancing” interests – the drive for profits – that is behind the scandals and unethical approach to customers by financial planners, insurance arms of the banks, mortgage loans, etc.

The drive for profits is behind such methods as rewarding employees for selling customers products that they cannot afford; refusing to pay out insurance claims on the basis of outdated medical definitions; not providing financial services that have been paid for; the list goes on.

Bank customers are the targeted victims of such crimes and unethical practices.

Talk about competition protecting customers’ interests is nonsense, especially when a monopoly of four work almost in unison. The concentration of capital managed by the Big Four is one of the highest in any industrialised country. In July 2016, they held almost 83 percent of loans to households and 80 percent of systemic risk in the financial system.

The litany of complaints associated with the Big Four confirms profits come first.

Scales tipped

There are three bodies where customers can seek redress in the financial system – the Financial Ombudsman, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman.

A one-stop banking tribunal covering all three areas was raised in the hearings. The banks appear to accept the idea and the government looks like pushing it: a further diversionary tactic giving the false impression that the government is taking some real, direct action.

At present the scales are not balanced in a horizontal position but hang vertically – weighed down by bank profits. There is a conflict between the banks and their drive to maximise profits and the interests of the people whose savings they invest and exploit.

The only way of eliminating this conflict of interest is to remove the private profit motive that drives their corporate appetite.

This can only be done through public ownership. The Communist Party of Australia calls for the establishment of a publicly owned and democratically controlled People’s Bank with a strong social charter.

This would provide real competition through the force of a publicly owned and publicly backed true alternative to the profit gouging banks.

Next article – Editorial – Devastation, cause and response

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