In May 1989, the Sydney news magazine ‘The Bulletin’ published a cover story of characteristic Australian bluntness: ‘Why the banks are bastards.’
The piece documented a litany of market abuses by the country’s largest lenders, which in those days, as now, were the so-called big four: Westpac, NAB, ANZ and CommBank.
It became one of the most talked-about articles of the time, so deeply embedding itself into the zeitgeist that, even to this day, almost three decades on, the expression can still frame the national conversation around Australian banks and their relationship with their customers. Australian banks have spent millions since, in marketing and feel-good campaigns trying to counter those five words.
But is it still true? Are Australian banks ‘bastards’? A succession of scandals at the big four seems to make a solid case. All four possess hairshirts they’ve donned frequently to address and apologize for all manner of transgressions, from staff sexual harassment and in-office drug use to botched emails encouraging staff to vote in the recent same-sex marriage plebiscite.
NAB and ANZ both recently settled an interest rate-rigging case brought by the regulator Asic, as Westpac fights on, claiming innocence.
Meanwhile, CommBank is being pursued by financial crime agency Austrac for more than 50,000 alleged breaches of counter-terrorism and money-laundering laws, which the apologetic bank blamed on technical troubles, this as it let go its chief executive.
So, is it unsurprising that Canberra has called a royal commission into misconduct in Australia’s banking industry?
Australians are voting with their feet by seeking out new sources of banking services. That should worry the complacent big four more than any politician's commission
The big Australian banks are frequently called to account by a robust press, by parliamentary committees and by the home-owning public, which continue to patronize them. The big four this year booked a collective A$32 billion ($24 billion) in profits in one of the world’s wealthiest economies, one that hasn’t endured a recession in 27 years.
Australian banks have been fined and levied billions over recent years, and their industry lobby complains that it has cooperated with 51 separate official inquiries and investigations since the late 2000s financial crisis.
There’s another popular Australian expression of the 1980s that comes to mind. Back then, rugged Aussies were relentlessly flogged a drink called Claytons that looked like high-end whisky but was actually a cola cordial.
Poured over ice or with a mixer, the point was to give the impression one was fashionably boozing when one wasn’t. It was supposedly good for one’s health, not least to limit the thousands of annual road deaths.
Claytons was “the drink you have when you are not having a drink”. The line inserted itself into the zeitgeist as deeply as bastard banks, and is still deployed to describe anything bogus. Australia’s banking probe is the Claytons royal commission – one you have when you don’t really have one.
Take prime minister Malcolm Turnbull’s announcement. Calling the inquiry “regrettable”, Turnbull and his treasurer, Scott Morrison, reminded Australians that banks are “the bedrock of the economy.”
Nor would the probe be “capitalism on trial,” Turnbull said, reminding Australians they use “one of the strongest and most stable banking, superannuation and financial services industries in the world, performing a critical role in underpinning the Australian economy. Our banking system is systemically strong, with internationally recognized world’s best prudential regulation and oversight.”
Why this? Why now?
That doesn’t sound like the flagging of an excoriation to us. Australian customers would argue there’s perhaps better grounds to probe market concentration – the big four have 85% of the market between them – but breaking down oligopolies is not in the commission’s terms of reference.
So, why have this one now?
In a word: politics. Calling a royal commission has bought Turnbull some time.
The resurgent Labor opposition smells blood and figures that few votes are lost from the left in attacking banks. Turnbull gamely protects the ruling right’s one-seat majority in parliament, a margin that threatens to vanish as yet more of his parliamentarians are revealed by the dual-citizenship fiasco that they aren’t as fair dinkum as they’ve claimed to be.
So, some time in 2019 and more than A$1 billion later – what UBS estimates the probe will cost – Australia’s commission is expected to confirm that Australia has one of the world’s best banking systems.
But it will add that, yes, banks could always be better corporate citizens than they’ve been, that they probably should be more compliant and, yes, they have been bastards sometimes.
In other words, tell Australians what they already know.
In the meantime, a lot of those Australians are voting with their feet by seeking out new sources of banking services, often community or fintech-based, as this issue of Asiamoney reports extensively on.That should worry the complacent big four more than any politician’s commission.