It was a thoroughgoing apology from Commonwealth CEO Ian Narev in July 2014. Amidst the turmoil of revelations about the shonks and spivs of Commonwealth Financial Planning, senate committee inquiries and Adele Ferguson routinely exposing more scandals, Narev wanted to apologise to victims of CFP. “I unreservedly apologise to all customers affected. Poor advice provided by some of our advisers between 2003 to 2012 caused financial loss and distress and I am truly sorry for that,” Narev said. And he was at pains to state that this was atypical of the Commonwealth Bank.
The way in which we have transformed our CFP and FWL businesses over the past three years shows our commitment to ensuring that the best interests of our customers are always our first and foremost consideration. This transformation brings CFP and FWL in line with our other businesses at the Commonwealth Bank.
Judging by yesterday’s extraordinary evidence from the banking royal commission, it seems more like CFP already was in line with other business at the Commonwealth Bank.
When Narev was uttering warm fuzzies about how “the best interests of our customers are always our first and foremost consideration”, his bank was selling credit card insurance to people who would never be able to make a claim on that insurance. Nine months after Narev’s statement, an internal report found that 64,000 people had been sold credit card plus products by the bank that they literally could never use, because they were unemployed.
Somehow, a few weeks later, that number shrunk to less than 28,000 when the Bank alerted the corporate regulator the Australian Securities and Investments Commission about the problem. “The problem was incorrectly stated,” an under-the-pump bank executive admitted to the commission yesterday.
As Crikey noted back in 2016, statements like Narev’s, and the sort of guff bank executives have been offering at parliamentary inquiries, are part of the banks’ method of avoiding serious scrutiny: apologise, insist that the offenders are rotten apples in an otherwise wonderful barrel — or at least are “out of line” with the rest of the bank — that there are no cultural problems. And nothing ever changes — there’ll simply be a future CEO offering the same apologies and explanations for another scandal, at a later point.
Well, here we are.
This is why the government didn’t want a banking royal commission. Because it knew its donor mates in the big four had plenty more scandals to hide. And, worse, they wouldn’t be able to use warm and fuzzies to protect themselves as with a bunch of politicians pursuing 50 different issues in an hour-long inquiry appearance. There’s nowhere to run and nowhere to hide from Kenneth Hayne and his counsel assisting Rowena Orr, no playing for the clock, no fobbing them off, no taking questions on notice, no playing defence until another questioner jumps in. And if you happen to be economical with the truth, well, the penalty is a little worse than some public embarrassment.
And thus, barely into a second week, we’re already losing count of the scandals uncovered.
Which brings us to a regulator to whom the existence of the royal commission is an implicit, but very real, rebuke: ASIC. ASIC, the performance of which during the CFP scandal would have been a comedy were it not for the grim human toll, has a new chairman, James Shipton. Shipton has been offering his own warm and fuzzies in a speech yesterday, about the issue of “trust” and how to address the lack of trust in the finance industry.
The prevalence of scandal in the financial sector was partly due to a lack of professionalism, Shipton said. And that could be addressed by the industry. “Industry, and the people within it, need to do more and need to take more of a leadership role,” according to the chairman. He said there was an opportunity for “the industry itself, working with standard setting and professional bodies, to promote and perhaps even require, professionalism within their sectors. In other words, there is a window of opportunity for the industry to take the lead without the imposition of a regulatory catalyst.”
All these years on, at a point where it’s hard to actually keep track of major banking scandals, as ASIC — which, we were told by a desperate Turnbull government, had the powers of a standing royal commission — battles the banks in court over rate-rigging, as every day of the royal commission uncovers some entirely new shambles from within the banks, the new head of ASIC is talking about avoiding regulating the finance industry and allowing “the industry to take the lead.”
You wonder what it would take, if anything, for ASIC to muscle up and actually do its job.
Bernard forgot to reiterate his usual insistence that there is no housing bubble, record housing debt in Australia is based on responsible and prudent lending and bank customers comfortably have the means to service that massive debt.
He also forgot to reiterate his usual point that anyone who has been warning otherwise is just a chicken-little doomsayer crying wolf…
To be fair, its difficult to have a housing bubble if the market is several hundreds of thousands of homes below market demand. Even when interests rates inevitably rise and many homes come back on the market it will still not be enough to meet demand.
The old “supply and demand” argument.
Demand can be as high as you like, housing PRICES are determined by available credit.
If that credit is being handed out imprudently, we have a housing bubble.
If demand exceeds supply it gives lenders even more incentive to lend imprudently (as clearly being shown by the RC).
High demand simply makes the housing bubble even larger as credit-driven “equity valuations” are used to push credit growth even further, creating a self-perpetuating feedback loop where prices being paid (based on credit issued) can increase almost exponentially. Sound familiar?
Accounting 101. Supply and demand. The more properties available, the cheaper they are. No ifs, no buts. All other factors that affect pricing pale in comparison.
poor banks – all large organisations have the same problems the ‘executives’ do not know what is happening at the coal face. Same result, same problems, same ‘oops-sorry’ if it was a Royal Commission into the Commonwealth or State public services or big mining companies . So the Banks are not alone but easily identified – this is a multi-million waste of time and money as nothing really can change the same forces [or physics of finance] are fixed the only alteration is a procession of Mea culpa. Why not institute a 5 yearly -mea culpa ceremony – just before Bank Holiday
“– this is a multi-million waste of time and money as nothing really can change the same forces [or physics of finance] are fixed ….”.
What rubbish – it might suit you to believe in the “physics of finance” (lol) but the crimes of the banks are caused by humans operating in a neo liberal environment dating from the 1980s / 1990s and can be changed by humans (a reversion to tougher regulatory standards along with a few years in prison for offenders should do the trick).
I’d be interested in all these examples you might have to support that position. From my observations “tougher regulatory standards” are about as real as the tooth fairy.
Not a waste of money Desmond. Accountability, even in this limited form, is essential, and we haven’t got to anything where prosecution is likely.
Nothing can be done? What about the Reserve Bank getting into basic banking, as outlined by Nicholas Gruen, to provide some actual competition.
It ain’t over yet.
Or even a return to a state bank with a fixed low interest rate for first-home buyers: that was how the older generation bought their first home. The Commonwealth Bank really was the Commonwealth Bank and bankers were respectable and responsible members of the community instead of the sly predators they now are.
No wonder Malcontent resisted calls for a Royal Commission-& no wonder he placed such limitations upon it when he finally acquiesced.
While ever there are staff bonuses reliant on pulling revenue, the culture, by definition, will be about screwing the customer. This is the very definition of culture – what are you there for?
Serve customers? Nup. Provide an efficient and cost effective banking system, under the explicit Federal licence and the implicit social licence? Nup
Make money, from our customer, who can only go to another bank! – Yep!
I must say I am enjoying this RC – or at least the tv snippets of it. “There’s nowhere to run and nowhere to hide from Kenneth Hayne and his counsel assisting Rowena Orr, … ” Hayne’s and Orr’s faces express exactly how I feel at some of the responses that are made.