News
Banking inquiry was just a paper tiger
7th Oct 2016
The Australian Lawyers Alliance (ALA) has renewed its call for a Royal Commission into the Australian banking system after the parliamentary inquiry failed to properly examine the systemic issues plaguing the industry.
ALA spokesperson Josh Mennen said that nothing of significance was emerging from the inquiry, and that the government would be wise to heed the growing calls for a Royal Commission into the troubled banking sector.
“The current parliamentary inquiry into banking is inadequate and is proving to be a paper tiger,” Mr Mennen said.
“The parliamentary forum format enables the banks to avoid questions by citing ‘competitive sensitivities’. There is simply not enough time for issues to be dealt with in more than a superficial glossing over.
“What we are seeing is essentially a PR exercise by the banks, which these bank executives, paid millions of dollars each year, are very good at,” Mr Mennen said.
“Their platitudes, spin and denials shield the public from exploring the real issues that have left so many victims in financial ruin.”
Mr Mennen said the banking practices exposed in recent media reports were a clear sign of deep cultural problems across the sector.
“The banks’ focus is no longer on its customers,” Mr Mennen said. “Attention now seems severely skewed toward revenue and sales rather than customers – this is a deep cultural problem, so the ‘few bad apples’ excuse doesn’t wash.”
“It’s not at all surprising that insurance claims staff have avoided meaningful discipline for mistreating deserving claimants, because claims assessors are encouraged to deny claims to meet their work targets,” Mr Mennen said.
Mr Mennen said that the best solution to exposing the cultural issues in the banking sector was to set up a Royal Commission, not the government’s proposal to set up a new banking Tribunal.
“Only a Royal Commission can give the necessary level of scrutiny needed to explore and address the systemic problems, by compelling document production and oral evidence under oath,” Mr Mennen said.
“A new Tribunal would look at individual complaints and be remedial in nature. Whilst it is essential that consumers who have been wronged are fully compensated, we also need to address the causes, which are deeply rooted in industry culture.”
“To do that, we need a Royal Commission conducted with openness and transparency,” Mr Mennen said.
Mr Mennen said that a Royal Commission would get to the heart of the systemic problems in the banking sector including:
- conflicted remuneration and other incentives offered to bank staff to push their own products in preference to unaffiliated products which may be more appropriate (cross selling);
- the deep cultural problems in banks’ insurance claims and financial advice departments, as exposed by the many horror stories that have come to light through media reporting;
- the mistreatment of whistleblowers and those who call out poor unethical and unlawful behaviour internally; and
- lame product development including the exorbitant credit card rates and outdated insurance definitions.
Mr Mennen said that other actions could also be implemented quickly to help end the cultural problems endemic in the banking sector. These included improving the protections offered to whistleblowers, with consideration given to the US-style incentive model, and a ‘scheme of last resort’ to compensate financial services victims where their financial services provider goes bust and is unable to pay compensation.
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