Plunder Down Under: The Rot in Australia’s Financial Services
It has all the elements of a crudely crafted if effective tale: banks and other financial services, founded, proud of their standing in society; financial service providers, with such pride, effectively charging the earth for providing elementary services; then, such entities, with self-assumed omnipotence, cheating, extorting and plundering their clients.
This is the scene in Australia, a country where the bankster and financial con artist have been enthroned for some time, worshipped as fictional job creators and wealth managers for the economy. Impunity was more or less guaranteed. All that might be expected would be the odd sacking here and there, the odd removal, the odd fine and limp slap of the wrist. But then came along something the Australian government never wanted: a Royal Commission.
While Commissioner Kenneth Hayne’s Royal Commission into the Banking, Superannuation and Financial Services industry initially promised to be a fizzer, one that risked being stage managed into oblivion by a conservative former High Court justice, the contrary has transpired. Even in its infancy, it has produced a string of revelations that have sent the financial establishment, and those supporting them, into apoplectic worry.
The Turnbull government, long steadfast in treating Australia’s banking and financial sector like a golden calf, has found itself encircled by misjudgement and error. Former front bencher Barnaby Joyce had to concede error in arguing against a Royal Commission into the sector. “I was wrong. What I have heard is [sic] so far is beyond disturbing.”
Ministers have been more mealy-mouthed, in particular Revenue Minister Kelly O’Dwyer who has given a string of performances featuring stellar denial and evasion. “Initially,” she told the ABC last Thursday, “the Government said that it didn’t feel that there was enough need for a royal commission. And we re-evaluated our position and we introduced one.”
Such a view ignores a strain of deep anti-banking suspicion within some conservative circles – notably of the agrarian populist persuasion. The National rebels George Christensen, Llew O’Brien and Barry O’Sullivan were repeatedly noisy on the subject. (The unregulated free market sits uneasily with them).
The undergrowth of abuse has proven extensive and thorny. Clients, for instance, have been charged services they were never supplied; monitoring systems to ensure that such services were, in fact, being provided, have been absent. Not even the dead have been spared, with the Commonwealth Bank’s financial business wing knowingly charging fees of the departed.
One revelatory report stretching back to 2012 from Deloitte found the Commonwealth Bank of Australia (CBA) particularly egregious on this score. According to the authors, 1,050 clients were overcharged to the hefty tune of $700,000 for advice never received, as their financial planners had left the business prior to 2012.
At times, the hearings have made for riveting viewing. Commissioner Hayne found himself in the position of reproaching Marianne Perkovic, head of the CBA’s private bank some three times for hedging responses to Michael Hodge, QC, senior counsel assisting the commission. “You will get on better if you listen to counsel’s question – if you have to stop and think about the question do it – but listen to counsel’s question and answer what you’re asked.”
Perkovic had remained oblique on the issue of the CBA’s foot dragging – some two years of it, in fact – regarding a failure to inform the Australian Services & Investment Commission (ASIC) on why it did not supply an annual review to financial advice clients of Commonwealth Financial Planning.
Scalps are being gathered; possible jail terms are being suggested; promises of share holder revolts are being made. The most notable of late has been AMP, whose board, after the resignation of chief executive Craig Meller risk a revolt from shareholders at a meeting on May 10. “At this stage,” announced Australian Council of Superannuation Investors CEO Louise Davidson, “we are thinking of voting against the re-election of the directors.”
This is not the view of Institutional Shareholder Services, a proxy firm that maintains the front that caution should be exercised in favour of the three directors in question. Stick by Holly Kramer, Vanessa Wallace and Andrew Harmos – for the moment.
“Given that the Royal Commission is in its early stages,” go the dousing words of the ISS report, “and although information presented thus far would be of concern, it is considered that shareholders may in due course review the findings of the Royal Commission, once presented, and any implications for their votes on directors at the appropriate time.”
It is precisely such attitudes of disbelief, caution and faith that have governed Australia’s financial sector during the course of a religiously praised period of uninterrupted growth. AMP’s value has been dramatically diminished, losing $4 billion from its market capitalisation. In naked terms, this constitutes a loss of 24 per cent of shareholder value over the course of six weeks. But that is merely one component of this financial nightmare, which has stimulated a certain vengeful nature on the part of shareholders.
What, then, with solutions? The regulator suggests greater oversight; the legislator suggests more rigid laws of vigilance. The penologist wishes to see the prisons filled with more white-collar criminals. Yet all in all, Australia’s financial service culture has been characterised by shyness and reluctance on the part of ASIC to force the issue and hold rapacity to account. Central to such a world is a remorseless drive for profit, one that resists government prying and notions of the public good.
One suggestion with merit has been floated. It lies deep within structural considerations that will require a return to more traditional operations, ones untainted by the advisory arm of the financial industry.
“Financial institutions,” suggests Allan Fels, former chairman of the Australian Competition and Consumer Commission, “must be forced to sell their advisory businesses. This will remove the unmanageable conflict of interest inherent in banks creating investment products while employing advisers to give purportedly independent recommendations to consumers about their investments.” Now that would be radical.
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How totally stupid is our so-called “leader” who did not want any inquiry into our banks & financial institutions? Typical bloody wealthy, flat earth, lying, inept blood obscenely over-paid so-called “liberal” politician! After what we have heard so far–& there is even more to come!–the whole banking/financial lot should be ashamed of themselves, the directors & managers etc should all be jailed, monies virtually “stolen” from their customers etc must be paid back, & the entire Industry must have strict guidelines etc drawn up & they should ALL be required to abide by them, under threat of jail time if ignored or not applied legally. And to think that most Australians have (especially) “trusted” the big 4 banks to do the right thing & especially obey the law, & be “honest” in their dealings with ALL their customers. Well compiled as usual Dr Kampak!
In case anyone has not noticed :
Money is the root of all evil
How money works is the 4th most important subject for our schools to teach. Without knowing how money really works you do not have a hope of holding the government or corporations to account.
Uhm … from hard experience … schools do NOT teach money management because most school teachers have no idea about how it is done.
Broaden the terms of the RC, include the influence of ASIC / APRA. Give indemnity to all whistle-blowers. While the RBA aims at a CPI of 2-3%/yr we have APRA mandating a 10%/yr ‘speed-limit’ on bank lending. It makes no sense to expose the economy to the level of offshore borrowings we now have. It would be good to hear from the Treasurer his reason for this inflationary tactic.
Agree Binoy, that idea of Allan Fells is a good start.
The correct quote is ‘ the LOVE of money is the root of all evil’ . So it is the human at fault, not the cash. I noticed in the 80s that the daily Bible quote was replaced by the market report. says it all, I think.
In my old country it was seen as rude to talk about money; in my new country , Australia, that seemed to be one of the most important topics of discussions, and as win jeavons says “the love of money is the root of all evil.”
Am intrigued re:
If so – then what are the three subjects that go before in terms of importance?
Am I too understand that what schools teach, or don’t, depends on whether particular teachers have certain skills, or not, and is unrelated to a curriculum, as mandated by a duly empowered (legislated) authority?
Money is OK. Just a tool that should support a civil society. It is the greed of the wealthy & industry that are of belief the world owes them a living.
Only the rich believe money is not important and only the stupid disagree with its accumulation. The problem today is the culture of greed has stripped the fairness out of the gathering of wealth and released the ‘as much as you can and as quick as you can’ attitude as a societal norm.
So stephenb2014 your misquote is real and the real quote virtual.
Teachers are no longer purveyors of knowledge as every phone knows more, is easier to use and costs less, Classes of 200 are becoming realistic and the vice chancellor gravy train and debilitating hecs debt of ‘teaching degrees’ should end.
Australians are being played for mugs by these Bankers. Turnbull being a Goldman Sachs Banker is part of the rort to statisfy and protect his mates. We can only hope that this Royal Commission lays it bare for all to see and that the perpetrators who continually fleece the public are prosecuted with the full force of the law.
Investigating the Banking sector is one thing but how about they look at the Reserve Bank as well. When was the last time the Reserve Bank was audited? This Rothschild controlled Bank is the greatest scam ever perpetrated on the Australian public.
The Reserve Bank of Australia and the Australian constitution
The Reserve Bank is a foreign ADI. A “foreign ADI” means a body corporate that:
(a) is a foreign corporation within the meaning of paragraph 51(xx) of the Constitution; and
(b) is authorised to carry on banking business in a foreign country; and
(c) has been granted an authority under section 9 to carry on banking business in Australia.
Prior to 1959 the Commonwealth issued and printed its own money and had control of the printing of money. However after the 1959 Reserve Bank Act, the Reserve Bank was established as a stand alone independent foreign ADI, which took over the printing of money and lent the money it printed to the Commonwealth at interest. So instead of the Commonwealth printing its own money, we have a foreign body corporate printing our money and lending it to the Commonwealth at interest which the Commonwealth needs to pay back!
As far as I am aware, that is total rubbish.
The RBA is a body corporate wholly owned by the Commonwealth of Australia.
An ADI is an Authorised Deposit-taking Institution . The RBA provides specialised banking services to the Australian Government and its agencies, other government instrumentalities, other central banks, and overseas official institutions.,
” lent the money it printed to the Commonwealth at interest.”
That’s just silly. The Commonwealth issues bonds on which it pays interest. They are not issued or bought by the RBA. They do decide when we need more bank notes. The mint does the coins.
Kaye, I agree, RBA is just another commonwealth corporation, yet when the commenter says printed, I think they mean the deficit is funded by borrowing from the banks – hence the money that could have been ‘printed’ at no cost to the commonwealth is instead created by banks and other institutions which lend us the funds to meet the budget deficit.
It needn’t be like this, the RBA could fund excess spending by the government. Read Stephanie Kelton or many others who hold this view.
This is just a wee bit too dodgy to accept. He didn’t like where the questioning was going so he hyperventilated to get out of the commission. The almost smug look on his face as he’s wheeled out says it all to me –
In December 2016, Kelly O’Dwyer requested a review of ASIC”s Enforcement procedures, the entire result is at the link below:
Of significance is the detailing of ASIC’s inability to comprehensively audit the finance sector:
It is not unreasonable to state that Kelly O’Dwyer was fully cognisant of ASIC’s limitations to conduct a proper audit. That she and the rest of the LNP feign surprise at the findings by the RC – and then have the gall to claim they would’ve called for an RC earlier had they realised what the financial sector has been able to get away with for many years…. leaves me as speechless and disgusted as it does exhausted.