The federal government has ditched a key recommendation from the banking royal commission to scrap trail commissions for new loans arranged by mortgage brokers after pressure from the industry and smaller lenders.
The mortgage broker industry, which had warned that many brokers would go out of business if the Hayne recommendation was approved, cheered Treasurer Josh Frydenberg’s announcement on Tuesday that the government would now review trail commissions in three years if it remains in government.
Cosmetic Cultural Changes skirt the real issues which are Structural. Liberals chased and tried to force Structural abandonment of Trade Unions with some success. They are now after TradeUnion Super Funds and any other Union activities but not so privatised banking where shareholder profits are the first priority. That business model is to service the working class rather than provide service to them. Remember when banks were Government controlled their primary business wasn’t debt creation and lending at 22% with penalties and fees that reach to the moon. Watch out for the forthcoming foreclosures in the housing market. Australia is about to have an American Fanny May experience. Who will the government bailout then?
Even by Wall Street standards of gouging customers this was one hell of a skim.
In 2012 and 2013, the Malaysian government was raising $6.5bn (£5bn) from investors to establish a sovereign wealth fund and finance various domestic infrastructure investment projects. And the cut for Goldman Sachs – the most prestigious investment bank in the world – for arranging the fundraising from the global capital markets? Ten per cent, or $600m.
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Charging for doing what you do not do is dishonest.
Giving advice that does not serve the client’s interests but profits the adviser is equally dishonest.
No matter whether the motive is called ‘greed’, ‘avarice’ or ‘pursuit of profit’, the conduct ignores basic standards of honesty.
Its prevalence and persistence require consideration of the issues of culture, regulation and structure.
The financial sector was certainly a service Industry that were employed to service their customers like pediGreed stallions for their shareholder’s pleasure rather than provide a service for their clients. When critiques start to blame customers for their lack of education on banking they are doing little more than slut-shaming the victims. The last time I recall when banks actually provided customers a service was when banks were Nationalised, Federal and State owned and not privatised.
The same could be said of our Energy and other utility sectors. Don’t ever tell me competition provides the best and cheapest services. We wouldn’t have a Royal Commission if it weren’t for the diligence of the ABC journalists to embarass this Liberal government into having the Royal Commission they didn’t want. Abbott was straight out of the box to have one on unions which if you recall found nothing but simply gave Murdoch media the opportunity to make great deal about Craig Thompson’s petty cash issue. (ODT)
Heads don’t roll when Corporations committ offences not so with Indigenous Australia (ODT)
The report shows it takes institutions an average 2145 days – or almost six years – between the first breach and the first compensation payment to be paid to customers.
“It is a ‘hear no evil, see no evil, speak no evil, spend no money on doing the right thing’ culture.”
But before we move on, let’s look back.
It’s easy to forget the commission — born in political acrimony less than a year ago — has delivered some truly gob-smacking shocks. Here are just a few:
Monday brings the start of the sixth, essentially final, leg of the banking royal commission.
A fortnight of public hearings will examine insurance.
But before we move on, let’s look back.
The Australian Financial Review has a peculiar view of bank malpractice: that it doesn’t exist. All this kerfuffle is really the result of bank customers’ complaining about the tragic consequences of their own failings.
The Sydney Morning Herald has devoted months to reproducing fake news on world affairs. Its stablemate has maintained comparable standards regarding coverage of Banking Royal Commission hearings.
- Was Christopher Skase Innocent?
- Is this this an argument for Islamic Banking?
- If this isn’t Systemic corruption what is? After all the banks have no investment they just created a debt from nothing anget paid all the way. (ODT)
The legal “profession” is central. It appears lawyers who work in bank litigation are often corrupt. It goes with the job. Myriad lawyers and law firms have built profitable businesses on their complicity. They are on the front line to savage the victim.
Victims perennially find that their own lawyers – at the time draining their last shekels – are working for the other side. This discovery really knocks the victim’s head around.
Banks force victims to pay for “consultants” and an endless round of valuers do the bank’s bidding, while the payee perennially doesn’t even get to see the reports they paid for.
Liquidators savage the wounded business, perennially consigning the lifeless body to the graveyard out of malice. They operate under direction and protection of the bank, though the law has it that the liquidator is an agent of the borrower. (Spender J does somersaults on this farce in NAB v Freeman, FCA 244, 12 March 2002.)
The regulators fail the borrower. ASIC tells the borrower complainant to bugger off, lying to them in the process regarding their powers. This practice is so institutionalised and the signatories so numerous that the cynical culture is evidently deeply entrenched.
The Financial Ombudsman Service (FOS) messes victim-complainants around, threatens and ultimately sells them out. This institution is there formally to offset the unequal power of the bank lender but it reinforces the power and bastardry of its banking sector funders.
This complicity by the top finance sector policeman and the “external dispute resolution” mediator is another mind-bender for the victims. This is “nails in the coffin” stuff.
The bank decided not to contact the families whose children’s bank accounts may have been activated without their permission nor did it contact the schools involved.
A decision was made not to broaden the investigation to the other 874 branches in operation at the time. The regulator and the board weren’t notified until recently.
A Commonwealth Bank loans officer who perpetrated a $3.5 million fraud on the bank and spent up big on cocaine, “lots of girls” and fine dining, was never reported to police, allowing him to continue working in the financial services sector.
Economic Vandalism which the taxpayer protects and guarantees won’t collapse (ODT)
The commission has heard that Australian banks have adopted actual lending practices (as distinct from their official lending policies) that claim so much household income for contract payments that borrowers are left without enough money to fund basic consumption levels: they are living in poverty.
This isn’t an accident: it is a strategic policy by banks. How much do banks think households need for daily living? According to the Australian Prudential Regulation Authority’s submission to the royal commission, banks “typically use the Household Expenditure Measure [a relative poverty measure] or the Henderson Poverty Index in loan calculators to estimate a borrower’s living expenses”.
So measures designed to capture the impacts of low incomes are now targeting financially-enmeshed middle-income households, and not as a statement of social shame, but as strategic objects of bank policy.
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.
‘Commercial interests’ trumped interests of consumers, ANZ admits. NAB’s Andrew Hagger gives evidence about falsifying of forms. All of the day’s testimony
From the man who can’t keep his mouth shut, Abbott’s advice
The Abbott government’s 2014 budget set in motion $120 million of cuts to ASIC’s funding over four years, leading to the loss of more than 200 staff. At the time, the government emphasised a greater role for self-regulation instead of government intervention.
Former ASIC chair Greg Medcraft was vocal in his criticism of the budget cuts and pushing for tougher penalties for misconduct.
Former prime minister Tony Abbott.
In 2016, the Turnbull government restored the funding and boosted the regulator’s investigative powers.
This week, Jacqueline McDowall became the human face of the malpractice of Australia’s financial services industry, as she tearfully recounted the woeful advice she was given by Westpac that cost her her house, and most of her superannuation.
The Liberals were right. There’s no need for a banking Royal Commission. It’s just fostering ill will and leading to a lot of complaints from people. Ok, not perhaps, the dead clients that the Commonwealth Bank continued to charge for advice even though they knew that they’d died. Let’s be real here, people. Dead people aren’t in the best position to make their own decisions so they probably needed the advice more than anyone. I have it from a source that in many cases the advice was: “You should stop paying me now that you’re dead.” Not one of these dead clients are complaining that the advice was wrong, even if it wasn’t heeded.
As former counsel for the banks, Chief Justice Kiefel should be well aware of their corrupt behaviour.
Australia’s major banks may have been breaching responsible lending obligations with inappropriate credit card limits, sending many people bankrupt.
Finally serious economists are considering a position I have been maintaining and writing about since the 2008 financial meltdown. Whatever its name— erasure, repudiation, abolishment, cancellation…
If the Reserve Bank’s official cash rate is 1.5 per cent and you can borrow for a home at 4.4 per cent, why are credit rates as high as 21 per cent?
Wells Fargo, one of the world’s biggest banks, just got caught in an elaborate scheme charging customers for bank accounts they never signed up for.
Parliamentary library paper contradicts claim by small business ombudsman Kate Carnell that her inquiry has similar clout
The powerful bank is in the news for attempting to suppress a report into money laundering. This is no surprise as the company’s entire history, right up to the present day, is one of financing drug cartels.
A Swiss study has set out to establish once and for all whether bankers are scheming, untrustworthy scoundrels.
The study of more than 200 international bankers put their honesty to the test and found them to be fundamentally decent human beings, until they were reminded about what they did for a living.
At that point, the research team discovered they began cheating on their tests.
Interestingly, that result was not replicated when sample groups from other professions were asked to complete similar tests.
Behavioural economists Alain Cohn, Ernst Fehr and Michel André Maréchal laid out their findings in a report entitled Business Culture and Dishonesty in the Banking Industry.
In the wake of a series of finance industry scandals, the team set out to test the bankers’ honesty with a simple coin-tossing test.
“They were asked to flip a coin 10 times and to self-report the outcomes of the coin flip,” Mr Cohn explained to The World Today.
“Their behaviour in the coin tossing task is a measure of their dishonest behaviour.”
In order to test that behaviour, the researchers also gave the bankers a financial incentive to lie about their results.
“They could cheat to increase their earnings,” Mr Cohn said.
“For example, in the first coin flip they knew that heads would give them $US20 and so, because they knew that heads would give them a good outcome, they could easily cheat and hide behind chance.”
But the researchers knew that, given half a chance, the promise of easy money could result in many non-bankers cheating on their results as well.
So, to refine their methodology, they first split their cohort of bankers into two groups.
Mr Cohn said the first control group was tested after being asked a series of questions unrelated to their occupation, for example “questions about tea consumption or favourite leisure activities”.
The second experimental group was asked a series of questions about their careers.
“In the experimental group we manipulated the saliency of participants’ occupation and role as a bank employee by asking a few questions about their professional background,” he said.
“So for example, we asked them what banks they worked for or how many years of professional experience they have.”
Bankers started cheating when reminded of their job
When the two groups were then asked to perform the coin-flipping task, the results were revealing.
The bankers who had been primed to think about their jobs were more likely to cheat than those whose minds were still occupied with thoughts about their homes and families.
The results suggest bankers are not inherently dishonest.
“They were very honest in the control condition,” Mr Cohn said.
“[It was] only when we rendered their professional role more salient [that] they began to cheat.”
It was a technique used by researchers previously with another segment of society suffering reputational problems, according to co-author Mr Maréchal.
“Everything actually started with an opportunity to conduct an experiment on cheating with inmates at a maximum security prison,” he said.
“The inmates cheated more when they were reminded of the fact that they were criminals. So we used a similar approach in this study to examine the business culture in the banking industry.”
‘Unwritten rules’ of industry promote dishonesty
When the researchers sampled a range of non-bankers – those employed in manufacturing, telecommunications and the pharmaceutical industries – they found no variation between control and experimental groups.
“We ran the same experiment with professionals from other occupations or in other industries,” Mr Cohn pointed out.
“We didn’t find any difference between the control and the experimental group, so this implies that there is something specific in the banking industry that promotes dishonest behaviour.
“It’s about unwritten rules of behaviour in the financial services industry that encourage or maybe tolerate dishonest behaviours.”
The research makes for uncomfortable reading for bankers, but the study received support from those inside the finance industry, conscious that recent scandals reflect a serious problem with banking culture.
One international bank allowed 128 of its staff to take part in the research on condition of anonymity. Another 80 participants were drawn from a range of other banks.
So if there is a genuine will to change the culture of banking, what can be done to encourage more scrupulous behaviour?
The researchers said the payment of bonuses for those generating high profits first needed to be closely scrutinised.
“It shouldn’t be that financial incentives reward employees for dishonest behaviour,” Mr Cohn said.
He also questioned the efficacy of forcing bank staff to sit through honesty training courses.
“If the ethics training remains in the abstract, it will not help much. Just pledging integrity is not enough. We think you have to exactly name and be very concrete about the behaviour deemed desirable.”