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(Cartoon by Mark Cornwall)

When it comes to Turnbull's reluctant Banking Royal Commission, the fix is in, writes banking corruption investigator Dr Evan Jones.

YOU COULDN'T make it up. It’s the Royal Commission follies. And this is just early days.

Those fronting for the banks, the Liberal Party front bench to the fore, have been denying the necessity for a banking Royal Commission for yonks. Overnight, the Big Four decide to OK a Royal Commission, so we are going to have a Royal Commission. On the banks’ terms. Brilliant!

The much desired Royal Commission is decapitated from the start. Check out Turnbull’s draft Terms of Reference.

The first paragraph is a giveaway:

'Australian has 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 systematically strong with internationally recognised, world’s best prudential regulation and oversight.'

What a gigantic fib, or set of fibs. This opener sets the scene for a short inquiry, because there’s implied to be nothing much to see under the covers.

Sections 4 & 5 of the draft Terms are the main worry, with respect to discretionary exclusions. Moreover, a key issue remains unanswered: will victims gain direct access to the Commission’s hearings and investigations?

Section 1(c) looks like a backdoor attempt at yet another union bashing inquiry with a potential attack on industry super funds. Numerous commenters have made the same point, including former NSW Liberal Party leader Peter Collins.

One has to hope that appointed ex-High Court judge Kenneth Hayne has no way of keeping the lid on the foul smell once the lid has been lifted.

Several dimensions demand close attention.

The naysayers and their calculated ignorance

Here’s one self-proclaimed expert, John Landels in the Sydney Morning Herald one 29 November:

'Yes, there have been misdemeanours, but they are being dealt with by current regulation and bank management. We are fortunate to have a sound, competitive and well-regulated banking system which survived the financial crisis. Let us not ruin it.'

Then there’s the well-credentialled financial journalists.

This from Anthony Boyd, Australian Financial Review, 1 December:

'Multiple inquiries, both public and private, over the past 10 years have failed to uncover systemic culture problems across the financial services sector. There have been egregious cases of misconduct and unethical behaviour but these have occurred at different times in different institutions and were found to be isolated cases.'

This from John Durie, The Australian (subscriber only):

'As the banking sector appears headed towards a seemingly inevitable yet totally unnecessary royal commission…' (22 November)

'[Mathias] Cormann told the The Australian and BHP’s Competitive Advantage Forum a new inquiry ‘wouldn’t actually lead to any public interest benefit at all’. He was 100 per cent correct, the bank leaders unsurprisingly said.' (24 November)

'If [a Royal Commission] happens then we know it will be the result of politics over reason and yet more evidence of the dysfunctional state of the government. … [There is a Productivity Commission inquiry into banking competition and an APRA inquiry into CBA culture.] What is the point then in spending another couple of hundred million dollars on a bank-bashing venture with no public benefit.' (28 November)

From Terry McCrann, The Australian (subscriber only), 2 December:

It’s not quite a royal commission about nothing; just a royal commission about nothing that we don’t already know.…

Yes, there have been cases of the banks acting unfairly and even illegally. But do we need a RC to uncover and rectify those cases? The simple fact that we ‘know about them’ is because they have been projected in various other forums, including dozens of other inquiries.

Is anyone going to seriously suggest that in 2017 legitimate victims are powerless? Either to get their ‘victimhood’ into the public arena or, more importantly and consequently, to get appropriate redress?

We have superior solutions to the marginal problems and they’re already in place or on the way. But that’s why we don’t need a Royal Commission, so this Clayton’s version is a show to shut all the whingers up. And it’s a huge waste of time and taxpayers’ money.

Boyd, Durie and McCrann have been on the job for decades. McCrann has always been a Murdoch hack, hectoring the hapless readers of the tabloid Herald-Sun. Boyd and Durie (also previously at the AFR) have quality journalism under their belts. What’s going on? Their status carries with it significant reportorial responsibilities.

More from McCrann:

'That somehow all this has continued to fester unseen, unlitigated and unremedied? That somehow they’ve all fallen between the cracks of the various 50-plus inquiries into the banks and associated services that have taken place just in the last 10 years since the global financial crisis? To say nothing of the multitude of forums from media, to parliaments, to a cricket team of regulators and ombudsmen, which are available and have dealt with them; along with the various exercises of remediation from the individual banks themselves.'

'That somehow all this has continued to fester unseen, unlitigated and unremedied'?

There’s the rub. Where to start?

McCrann possibly can’t bring himself to read Fairfax, where a series of CBA crimes have been extensively reported – Storm Financial, the swathe of Bankwest customer foreclosures following the CBA takeover, Commonwealth Financial Planning, Comminsure and its ATMs as ready money laundering vehicles. These affairs were hardly festering unseen, and none of them appropriately remedied.

As for the significant small business and family farmer area, naysayers have more (superficial) cause. No media deigns to go there.

There is the occasional exposure in this domain, such as the 60 Minutes program in April 2015, centred on then WA wheat farmer Rod Culleton, and the Fairfax Good Weekend farmer story by freelance journalist Susan Chenery, 9 May 2015. Nothing came from these stories. Culleton was, of course, briefly a One Nation Senator, deposed for his having fallen foul of the law (much publicity), but his claims regarding the ANZ’s alleged unconscionable treatment of former Landmark farming customers were never pursued by the media or the regulators.

There was also rare media exposure of two small business cases, both NAB: Kay/Canli/Inak (2010), the rare pro-victim court judgment here) and Leith Williamson (2016). These victims had favourable settlements, not least because the NAB’s action in both cases was transparently unconscionable (arguably fraudulent) but because publicity exposed the NAB to shame. Media exposure or not is thus an important part of redressing the power imbalance.

However, in general, the extent of the ravages suffered by small business and family farmers from bank lender predation remains invisible. Although Boyd, Durie and McCrann could readily educate themselves, should they have considered it necessary to fulfil their mandate.

Countless submissions by bank victims are available at the sites of relevant Parliamentary inquiries over the past decade. For example, the 2012 Post-GFC Banking Sector Inquiry, the 2013 Performance of ASIC Inquiry, the 2015-16 Impairment of Customer Loans Inquiry, the 2017 Consumer Protection Inquiry and the Lending to Primary Production Customers Inquiry. Admittedly, even getting through a handful is a hard slog, but the evidence is there. And they are painful to read.

The last word goes to Harold Mitchell, SMH, 8 December, who thinks that this Royal Commission is a waste of time. Mitchell is an air-head master of superficiality, and a waste of time and space. His elevation to regular columnist, following the retrenchment of myriad serious journalists, epitomises Fairfax’s attraction to trivia and establishment verities over substance.

Who is implicated in the grand scam?

On 30 November the eight chairs and CEOs sent Treasurer Scott Morrison a letter signaling their readiness to accommodate a Royal Commission. The heat had become intolerable. Clearly, they wanted a process that they could exert the greatest influence over, with the Liberal National Coalition in power federally and a favourable terms of reference.

Nobody has pointed out the obvious. The boards of the Big Four are implicated in the ongoing scams, and the dysfunctional structures and cultures that generate them. So what are the boards for?

When the NAB’s trading desk was exposed in 2003-04 as manipulating trades and trading figures, board chairman Charles Allen sacked CEO Frank Cicutto and he himself fell on his sword soon after. Nothing of that nature is happening here. CBA CEO Ian Narev has been allowed to retire gracefully, meanwhile still delivering crackpot utterances as if he carried authority.

Where are the non-executive directors of the Big Four? Drawing their pay for remaining silent.

Two people in particular are exposed as shameable: David Gonski and Ken Henry. Gonski, he of the egalitarian school financing reforms, long-time chancellor of UNSW, non-executive chair of the federal Future Fund and so on, should be a public figure beyond repute. Yet he besmirches his reputation and his role in public bodies by continuing in a senior role in an industry mired in corruption. He should quit his ANZ chairmanship post-haste.

Ken Henry’s Wikipedia entry bizarrely still has him as a public servant. In March 2014, I sent Henry a letter, which was returned unopened. The letter, highlighting that his move was not in the public interest, is published HERE.

The Andrew Thorburn and Ken Henry team runs a better ship than previous CEO Cameron Clyne (a figure head?) and board chairman Michael Chaney, who could hardly be effective while residing in Western Australia. But the new team hasn’t changed the errant or corrupt pockets of culture at the NAB. From my knowledge of the recent experience of several NAB victims, nothing has changed under the bonnet.

The Thorburn/Henry team divested the running sore that was the British Clydesdale Bank and its Yorkshire subsidiary — a smart move in itself, yet while leaving the victims of that appallingly run bank to hang out to dry,

Equally bizarrely, in August 2017, Henry attempted to divert the distrust of the financial sector by claiming that most, if not all, large institutions are distrusted by the public. If he’s talking about the age of monopoly capital, he’s onto something. But first, physician heal thyself.

In mid-November, NAB sacked a score of lending officers for manipulating loan documentation. Well and good, but purely token. NAB, as with the other banks, is under pressure, and is throwing some staff overboard to keep the investigators from the door. If would be delightful if any of those sacked became whistleblowers regarding NAB’s cultural proclivities.

A key indicator to lead one to question whether anything has changed at the NAB is the fact that the NAB under Thorburn (and later Henry) chose to take a guarantor to court. In a landmark decision in NAB v Rice, Elliott J decided for the guarantor, because the guarantee had been wrongfully obtained. Thorburn/Henry’s NAB appealed, claiming that the Code of Banking Practice was merely an optional extra. The NAB lost on appeal, but it appears to be business as usual at the NAB regarding the Code.

The NAB has an attraction to public personnel. The bank (under CEO Don Argus) got the Liberal Party out of a financial hole in the early 1990s and was a major financier of John Howard’s victory in 1996 (Argus wanted the Four Pillars policy scuttled).

The NAB sponsored the 2006 Melbourne Commonwealth Games to keep Premier Steve Bracks on board. The bank subsequently employed Bracks and moral campaigner Tim Costello on an ethics committee (joke) for some time. It facilitated a smooth revolving door for Arthur Sinodinos between playing ministerial adviser and selection for the Senate. Ditto for Kelly O’Dwyer, between playing ministerial adviser and election in a safe Liberal seat.

The bank had a friend in the judiciary, Queensland’s Paul de Jersey, with a string of court directions and judgments favouring the NAB. A sometime NAB staffer told me that the NAB even hires ex-policemen (this claim hasn’t been substantiated), meaning that the prospect of a bank retirement package might colour their policing work in that domain. The bank has recently hired ex-NSW Premier Mike Baird, on a fabulous salary, to continue the same rotten business that Baird pursued as Premier. In short, the NAB buys influence.

The hiring of Henry is of this genre. Like Gonski, Henry continues to be involved with a number of public bodies. One can’t be a key player in a totally compromised private banking sector at the same time. Henry should be forced to choose one or the other.

Then there’s David Murray. Murray (with then General Counsel Les Taylor) was a key figure in eradicating the public purpose from the CBA (see my ‘The Dark Side of the CBA’, Part 1) yet he retains an elevated status as an authority on the financial sector. He was chosen by Prime Minister Tony Abbott and "lifter and leaner" Treasurer Joe Hockey to perform a Clayton’s investigation of the finance sector and head off fundamental critique at the pass.

With his November 2014 Financial System Inquiry report, Murray skirted all the issues that have led to persistent calls for a Royal Commission. The Murray Committee and Advisory Panel comprised only bankers or business people. The treatment of "consumer protection" is risible (Ch.4). The Report opines that alternative dispute resolution schemes are working well (on the contrary), that self-regulation is often superior to government regulation (it isn’t) and that product providers need to lift their game in terms of accountability (they won’t of their own accord). The small business and farmer borrower segments were, as usual, ignored. In short, a whitewash, just like Treasurer Keating’s 1991 Martin Report.

Murray has been singularly aggressive, outspoken, in criticising any attempt (for example, the SMH, 28 November) to hold the banks to account. Yet he continues to be quoted as an authority.

This is the point here. Amongst those with significant roles in perpetuating finance sector crimes and public figures in pubic roles commanding respectability and authority are some of the same people. This is an intolerable overlap. It is a contributory factor for why the finance sector has remained immune for its unconscionable and fraudulent practices to date.

Read Part Two of The Clayton’s Banking Royal Commission: More of the same

Dr Evan Jones is a retired political economist.

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