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Banking Royal Commission: Financial ruin and the road to personal tragedy

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Cartoon by Mark David / @mdavidcartoons.

As the Banking Royal Commission reveals more are more accounts of unconscionable and deliberate disregard for the plight of customers, it is now up to Parliament to ensure policy change, writes Lynton Freeman.

IN MELBOURNE, the Financial Services Royal Commission has heard the coordination of Bankwest loan book policy to destroy the values of customers’ equity by declaring their industries at risk and increasing their risk rates for lending.

In one instance, 6.5 per cent, and in another 9 per cent, were added on top of already above-normal rates, compared to some financial institutions, laying the foundations for personal tragedy.

An issue not answered was the customers' personal tragedy consequences of the banks' need-to-know policies. The writer’s mind goes back to the attitude of financial institutions towards the customers in previous bank takeovers, such as the Commonwealth Development Bank, Commercial Bank of Australia and others.

Would financiers still have the same arrogance towards personal wealth if social media had been here then, as strong as it is today?

The whole issue of why banks had formally established branches was because of the representation and political influence it gave them, and in explaining away opportunities needed in communities for success. This stopped a repeat of the Chifley (1946) era of banking political issues culminating in a referendum to nationalise the banks.

While many commentators consider the Turnbull Government supported the banks to stop the Royal Commission, that whole political debate became unnecessary since the banks themselves asked for the investigation. Did Barnaby Joyce or the Nationals (despite Barnaby secretly setting the tune for his colleagues to roll the Liberals), or did the Turnbull Government, outwit the banks into requesting the Royal Commission?

It is now up to the Parliament to improve the terms of reference as it continues, and to ensure it continues to investigate the problems created for the industry and individual entities relying on the institutions — not to continue a need-to-know policy but to adopt proper social impact policies.

For bankers, the need to consider other entities is unnecessary. Why should bankers, the constitutionally authorised policemen of community financial discipline, be expected to be candid and honest? They are in business to make money for their shareholders and themselves.

To treat the "serfs" (customers) with respect and be honest may betray the duties of a financial policeman after all — just as some people use roads, they use banks. And, in fact, the Government has legislated to facilitate bank control of customers' funds. It is now an offence to have more than $10,000 in undeclared cash, while Centrelink payments are bank distributed.

Today, in Brisbane, we may see the banks' attitude to the serfs further revealed, as Monday's evidence showed the need-to-know policy was well entrenched in the ANZ–Landmark takeover. HSBC, the previous owner-operators of Bankwest, were major players in the Libor scandal, paying large fines, particularly in Europe. Landmark, when trading as Dalgety in the 1980s, sold their loan book to the ANZ.

The issue is what will the banks do about their previous need-to-know approach to customers and what will the Commissioner consider important? Will we start to see the glimmer of social impact become important to a ruthless process of combination of financial police (banks) in takeovers of unfortunate customers, previously betrayed by bad financial institutional management?

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