The Commonwealth Bank initiated the Comminsure scam because they got away with the BankWest, Colonial First State and Storm Financial scams. Turnbull's claims that we don't need a banking royal commission are farcical, says Dr Evan Jones.
ADELE FERGUSON, Fairfax’s cop on the bank malpractice beat, wrote yet another piece, on 17 September, on the pervasive problems in the banking sector.
'Most argue the problems happened in the past, were caused by a few rogue employees, and that compensation will be forthcoming. The problem is, it still keeps happening.'
Ferguson’s many articles on the subject have led her to become a strong advocate for the necessity for a royal commission into the sector.
On 19 September, the Sydney Morning Herald published a letter from the Australian Bankers’ Association (ABA) head, Steven Münchenberg.
Bank inquest too risky
Adele Ferguson's dismissal of the risks of a Royal Commission to international confidence in the Australian banking system seriously misses the point.
Australia's is a small economy that relies on raising money from overseas to fund investment and borrowing. As we saw during the global financial and European debt crises, at times of volatility and heightened nervousness in international markets, confidence in banking systems determines the costs of this money and, in extreme circumstances, whether it is available at all.
Given the current fragility of international markets and major economies, a Royal Commission would raise a real risk of undermining confidence in the policies of successive Australian governments, our regulators and the management of our banks.
Running this risk is unnecessary. Banks acknowledge the problems in the industry and are taking action now to fix them.
Münchenberg leads an organisation that was created in the late 1940s to fight against Prime Minister Chifley’s attempted nationalisation of the banks. The ABA has been an active and effective lobbyist for the sector ever since, as it admits on its website.
Apart from the ruthless pursuit of the industry’s self-interest, the ABA excels in diversionary PR, comparable to the two-faced strategies of individual banks.
The ABA works with government, regulators and other stakeholders to improve public awareness and understanding of the industry’s contribution to the economy (…with a strong emphasis on consultation with stakeholders …) and to ensure Australia’s banking customers continue to benefit from a stable, competitive and accessible banking industry.
Just so much palaver. Bank victims know all about the industry’s contribution and certain dimensions of that “contribution” are not pretty. Moreover, as vulnerable stakeholders, they haven’t been consulted.
With perennial banking-induced crises and aggrieved customer complaints, Münchenberg is perennially called upon to comment. It is Münchenberg’s function to dissemble and to lie.
The demands placed on the ABA’s head honcho provide a serviceable apprenticeship for them to move up to shill for Big Tobacco.
Instance the letter above. We have an ultra cynical claim – absurd – that international capital markets will be scared off by a royal commission. If the ghost in the machine that is the international capital markets harbours any intelligence, it will already be well familiar with the widespread incompetence and corruption that counts as standard practice down under.
What counts for “the markets” is rather something else — government guarantees that underpin errant banks’ relative stability, as occurred after the 2008 GFC. Too important to be allowed to fail; ah, the capital markets love that quality.
As for the statement 'Banks acknowledge the problems in the industry and are taking action now to fix them' — well this is a straight-out lie. Banks are taking no action whatsoever to fix the problems. They are paying mickey-mouse compensation at best to defrauded investors or insurers. As for victimised small business or farmer customers, the banks are continuing to fight each of them doggedly with all the usual dirty tricks.
No bank has a lily-white reputation. But the CBA and NAB continue to vie for top spot in the nastiness stakes.
King O’Malley (national people’s bank activist), Andrew Fisher (Labor Prime Minister overseeing the creation of the CBA in 1911), Ben Chifley (member of the 1937 Napier banking inquiry and prime minister/treasurer overseeing the 1945 Banking Acts) and H C Coombs (Head of the combined commercial/regulatory Commonwealth Bank, 1949-59) would all be proverbially turning in their graves at what has happened to the CBA since financial deregulation in the mid-1980s.
The current CBA is light years removed from the ambitions of its creators and nurturers, who placed the public interest foremost. The CBA’s CEO Ian Narev should be before a court instead of strutting the media stage on the reportage of mega-profits and a mega-salary to boot. Ditto Chief General Counsel David Cohen, probably the central figure in keeping the CBA’s countless victims at bay and consigned to destitution.
Münchenberg generally confines himself to abstractions. For him to mention specifics would have him sailing into stormy waters.
The CBA Comminsure scandal is transparently an instance of strategic malpractice. The CBA takedown of BankWest borrowers was a large-scale criminal scam, involving losses of hundreds of millions of dollars to the victims. CBA top brass initiated the Comminsure scam because they got away (to date) with the BankWest borrower scam, which they initiated because they got away with the Colonial First State investor scam, which they in turn initiated because they got away with the Storm Financial scam. A tough regulatory regime indeed!
A royal commission, unlike the parliamentary inquiries into each of these matters, could subpoena documents and get to the source, character and key perpetrators of each scam. The CBA has a lot at stake in heading off a royal commission.
Ditto the NAB. The NAB has continued on its committed path of corruption, in spite of another change of leadership to CEO Andrew Thorburn and board chairman (scandalously) former Treasury Secretary Ken Henry.
Clydesdale Bank victims of various scams have been left to rot, following the NAB hiving off its British subsidiary as in the too-hard basket.
Behind the scenes, NAB attempts to wear down its victims – with, as usual, assistance from the Financial Ombudsman – who are seeking redress.
The NAB has been implicated in a criminal scam in which a criminal network appropriates personal details from the Veda credit system and creates fraudulent mortgage documentation in order to steal the targeted victim’s property. The network typically has an operative within a bank — in this case the NAB. One such victim has been Patricia Thirup, with the NAB pursuing the Thirups’s residence on grounds of default on a (doctored) mortgage, and the court happy to oblige the NAB’s participation in the scam. The police are now on the trail of this criminal network but the NAB, curiously, is nowhere to be seen in this endeavour.
Bizarrely and exemplifying the supreme arrogance of the banks, the NAB also saw fit to defend a claim against a guarantor on the grounds that the Code of Banking Practice was really just an optional extra. The judge, in NAB v Rice (March 2015), thought otherwise. This judgement against the bank has become a landmark case in establishing the legal status of the Code.
On the ABA’s list of activities, the top item is the Code of Banking Practice.
'Continuing development of the Code of Banking Practice and a number of other industry standards and guidelines which ensure best practice across the Australian banking industry on issues such as … protection for customers from financial abuse …'
Why wasn’t the ABA advising the NAB regarding its obligations under the Code?
The ABA, under a previous CEO, was instrumental in the banks’ then successful attempt to neuter the Code. This occurred in 2003, when the banks were belatedly and reluctantly admitting small business/farmer customers into the Code’s purview.
Complaints under the Code were to be steered towards a new body, the Code Compliance Monitoring Committee, which was in turn to be severely constrained in its operations. All this was done in secret. The history of the Code and the 2003 machinations are recounted briefly in my 2013 article on the Priestleys, NAB victims, and their experience in court.
The Code was updated in 2013 to reach a 72-page monster. But it still remains effectively a public relations exercise. There is no evidence that the banks have taken the Rice judgement to heart, not least because the sector’s cowboy modus operandi is in direct conflict with the Code’s formal promises.
Just what the ABA is doing about the corrupt domain of banking culture, as opposed to the formalities of the Code on paper, is anybody’s business.
Münchenberg has the public relations patter down pat.
In an ABC interview, Münchenberg’s line was “what does a royal commission add that is not already being dealt with?”
As, for example:
- The banking sector is highly regulated. Correction: there are myriad regulatory institutions but self-evidently they aren’t performing the job required.
- We’ve just finished the biggest financial inquiry in 17 years (the Murray Financial System Inquiry). Correction: David Murray’s reign at the top of the CBA contributed to the current malaise, and his “inquiry” studiously avoided all the running sores that are the stuff of victim complaints.
- ASIC does a very good job in probing the banking system. Both APRA and ASIC have the capacity to look at the systematic and underlying cultural issues. Correction: it is now well known that ASIC does not do “a very good job”. APRA and ASIC do have the capacity to look at “systematic and underlying cultural issues” but they decline to do so.
Münchenberg had an article in the Sydney Morning Herald on 9 August, where he repeats the mantra. Addressing what he claims was Labor’s agenda behind its call for a royal commission, he claims that we are already ticking all the boxes.
“If customers aren't satisfied with the way a bank has handled a complaint, they can go to the Financial Ombudsman Service (FOS).”
Victims already go to FOS with their complaints and are doubly screwed by FOS’ complicity with its bank providers.
“ASIC has much greater powers than any royal commission, which can only ask questions and write a report. And ASIC has shown it is not afraid to use those powers.”
ASIC is taking action on rate-rigging by the banks — precisely an area in which Münchenberg claims that his constituency denies culpability. ASIC has imposed some minor fines and ordered compensation on some retail customer issues, but otherwise ASIC is missing in action.
I am in possession of multiple letters from ASIC to bank victim complainants (especially small business), in which the ASIC functionary lies to them that the regulator has considered their case and then tells the victim to bugger off. The letters have a formulaic character to them, which indicates that a pre-existing form rejection letter is trotted out on regular occasions.
The indifference and contempt for victims displayed by ASIC personnel in these letters is palpable. (Ditto for FOS personnel.)
ASIC personnel claimed at a hearing of the Impairment of Customer Loans inquiry, 23 November 2015, that the regulator does not have the capacity (or the will) to take on unconscionability cases, responsibility for which is mandated in the ASIC Act.
As for the Trio Capital scandal – intrinsically a criminal scam – ASIC gave up at the first hurdle.
Sometime insider James Wheeldon highlights in the Saturday Paper (subscriber only) that the problems with ASIC are deeply entrenched — 30 April and 19 July.
Münchenberg, as the banking sector’s public face, stonewalls diplomatically, but more aggressive options are not out of the question.
As noted in the Sydney Morning Herald, 12 April:
'The head of the nation's banking lobbying cautioned the lobby group is not "actively considering" an ad campaign [mining tax-style] at this time … but said it remained on the table as one of a range of options under consideration.'
A “marketing consultant”, Tony Ralph, is dragged out from under a rock and quoted as saying that we should throw the book at Labor’s “political opportunism”:
"What makes campaigns of this nature successful is impact at the ballot box. I'd demonstrate the core truths …”
Well, Mr Ralph, the hoi polloi already know the “core truths” regarding the banks and they are living with the adverse consequences.
On 20 September, the day after Münchenberg’s letter appeared in the SMH, three letters were published in response, under the heading 'Banks' immorality justifies an inquest'.
They capture the mood rather well:
One is indebted to Steven Munchenberg of the Australian Bankers Association (Letters, September 19) for explaining his group's moral code. If an organisation has committed so many wrongs that to publicise them would lead to a loss of confidence in that organisation, that is sufficient grounds for not publicising or even investigating the wrongdoings, let alone punishing them. Fortunately, our legal system does not operate in a similar moral vacuum.
~ Lewis Winders Sheffield (Tas)
Munchenberg misses the point: that the problems in the banking system should not have happened and would not have happened if proper standards had been maintained from the outset. That suggests a failure at the top level of management. It should not require a whistleblower to destroy their career to bring to light the failings of the system before action is taken. Consumers need to know whether the fault lies with simple negligence or a culture which endorses profit ahead of ethics. Bankers themselves are never willingly going to tell us that.
~ Arthur Cooper Alstonville
Had it not been for Adele Ferguson exposing their illegal practices the banks would not now acknowledge the problems and be taking belated action in trying to fix the problems they created. What does the ABA have to fear from a royal commission?
~ Lindsay Somerville Lindfield
The ball is in the ABA’s court. It is clear that Steve Münchenberg has a lot of work ahead of him.
After much stuffing around, Labor established a Federal small business commissioner in early 2013, following precedents by the states. It was headed by someone with a track record. In 2015, Prime Minister Abbott refashioned the outfit with an unrecallable name and acronym, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and, in early 2016, Prime Minister Turnbull installed Liberal Party veteran Kate Carnell at its head. Jobs for the girls.
At the beginning of September, Turnbull handed the ASBFEO responsibility for a mini-investigation into small business problems with bank lenders, specifically relating to cases arising under the Impairment of Customer Loans Inquiry (the CBA takedown of BankWest borrowers). Carnell claims that her office will have “royal commission-like powers”. Indeed? Then why not a proper royal commission with appropriate parameters? This is a farce in the making.
A victim of brutal criminal treatment by CBA/BankWest readily sent in his materials for investigation, only to be informed that:
'The Australian Small Business and Family Enterprise Ombudsman Act 2015 precludes our office from being able to provide assistance with matters that have previously been before a court or tribunal or a matter that consists of enforcement of a judgement or order, such as your matter …'
What? That proviso excludes pretty much all the high profile multi-million dollar loss victims of CBA/BankWest. The relevant section of the Australian Small Business and Family Enterprise Ombudsman Act 2015 is Section 67. These exclusions clauses are also standard fare for ASIC and FOS. Such exclusions automatically allows any authority to avoid confronting an elephant in the room which is the legal profession and the courts’ complicity in bank malpractice.
The ASBFEO spokesperson notes that the victim’s case will be handed to the Ombudsman’s “Advocacy team” which is handling the bank loans inquiry.
So how can one section of the ASBFEO operate contrary to the terms laid down in that edifice’s enabling legislation? And what skills will the staff, in all probability totally unversed in the complex phenomenon of bank-borrower relationships, bring to this inquiry?
Farce indeed. Thanks Malcolm. The nightmare continues.
Dr Evan Jones is a retired political economist.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
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