Section 912A of the Corporations Act states that a financial services licensee, such as a bank, must “do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly.”
Manipulating markets is very difficult to do alone. It requires more than one set of bankers or brokers to be successful. In the unlikely event that just one bank is involved, some other entity has to be turning a blind eye.
On Friday 4th of March 2016, ASIC (The Australian Securities and Investments Commission), commenced legal proceedings in the Federal Court in Melbourne against the Australia and New Zealand Banking Group Limited (ANZ) for unconscionable conduct and market manipulation in relation to the ANZ’s involvement in setting the bank bill swap reference rate (BBSW) in the period March 2010 to May 2012.
In a civil case in the Federal Court of Australia in Victoria, ASIC claimed that
ANZ “abused its position in the Bank Bill Market to the disadvantage of other persons (including its customers) whose exposure in the BBSW (Bank Bill Swap Reference Rate), was in the opposite direction.”
The announcement sent a shudder through the banking and financial industry.
We notice that senior bank officers are always ready, though, to issue statements or comment on their fiduciary responsibilities. ANZ’s chief risk officer, Nigel Williams is on the record as saying, “We want to be known as a bank with a strong focus on culture, ethics and fairness.”
CBA Chairman David Turner said four months earlier when quizzed by a shareholder over its dealings subsequent to its acquisition of BankWest, “We think we will be the ethical bank, the bank others look up to for honesty, transparency, decency, good management, openness. That is exactly where we are trying to go.”
CBA Chief executive Ian Narev also said in November, 2015, “Trust is at the heart of banking. It’s not good enough if trust or good ethics exist in the vast majority of the organisation, you’ve got to do your best to get it right across the organisation.”
Then came the CommInsure scandal where its chief medical officer, Dr Koh “revealed doctors were pressured to change their opinions, outdated medical definitions were used to deny payouts, and medical files disappeared from the internal filing system.”
At a senate enquire in October 2015 former assessment manager for CBA’s financial planning division, Russell Phillips criticised the compensation scheme set up by the bank to review cases where CBA customers lost hundreds of millions of dollars after financial planners put their clients’ money into high-risk investments without their permission. When he made his feelings known, the bank subsequently sacked him.
Jeff Morris, the former CBA financial adviser who first exposed the financial scandal, said there should have been a royal commission into CBA’s failings. “Because CBA was let off that royal commission, they’ve gone back to their old tricks,” he told the inquiry.
These few examples are probably just the tip of the iceberg.
Every time the banks come under pressure for alleged improper practices, they roll out the same scripted response. They speak of ethics, fairness, efficiency and honesty. It’s not hard to see a pattern of, it’s not us, here. Which, of course gives us reason to think it just might be.
That is why we need a Royal Commission into the banking and financial services industry. It would not surprise me that the very fear of one has already precipitated the removal of damning evidence from within.
But it goes much deeper than that. It is our democratic freedom that is being abused here. The government says it’s unnecessary, even though a number of its own members are calling for one. A recent survey showed 65% of those polled want one. The Coalition, broadly speaking, see corporate capitalism and free trade as the pathway to prosperity for everyone.
It’s the pathway to prosperity alright. But for whom?
The banks are warning that it could threaten their reputation abroad. They have, for so long now, been wagging the government’s tail across both sides of politics, they can sense that the party might be over.
Malcolm Turnbull regards the problem as being no more than, “a few troubling incidents.” This, from a former banker, one of many who now hold positions of power in governments around the world.
Yes, we need a Royal Commission. We need one like a Cardiomyopathy patient needs a heart transplant.