CANBERRA – In recent weeks the Australian government conducted an inquiry into Australia’s four major banks: Westpac, ANZ, NAB and the Commonwealth Bank.
The inquiry exposed misconduct by all four banks, each with their own separate scandals.
Westpac Chief Executive Brian Hartzer said a “trust gap” had opened up and banks need to to work harder to win back customers faith.
Hartzer was questioned about actions and decisions of Westpac’s car finance business, Capital Finance Australia. In April, Capital Finance Australia was found to have breached consumer protection laws by failing to give customers notice before repossessing their cars, paying penalties of almost $500,000.
Hartzer blamed Westpac’s wrongdoing on “operational errors” and misjudgements.
In May the ANZ bank reported a 22% fall in its half-year profits, which fell to $2.8 billion.
ANZ Chief Executive Shayne Elliott was also questioned by Labor MP Pat Conroy over an increase in the number of planners reported to the Australian Securities and Investments Commission of around 750%, from about six to 45 in the past twelve months.
“We have a 750% increase in a twelve month period…what is going on in your organisation?” Conroy asked.
“When we find problems we report them…we have raised standards,” Elliott replied.
Elliott was also asked about the ANZ bank’s response to the bank-bill swap rate scandal. The bank is fighting allegations in the Federal Court that it manipulated the swap rate, which is used to price contracts worth an estimated $20 trillion.
ANZ denies the allegations and is fighting them in court.
NAB’s Chief Executive Andrew Thorburn was quizzed over questionable financial advice given to its customers.
Thorburn apologised for past problems and said the “bank is committed to fixing issues in future”.
“For bankers, trust is the currency that matters the most,” he said.
The committee’s Chairman, Liberal MP David Coleman, asked how the bank could end up in a situation where it had to compensate more than 750 financial advice customers for a total of around $14.5 million between January 2010 and September 2014.
The bank confirmed 43 financial planners had been dismissed or have left over compliance and conduct issues.
But Thorburn admitted no senior executives were dismissed.
He said an independent review found there wasn’t a “systemic issue” with the bank’s financial advice.
The bank also faced questions over how transparent the bank is in sharing its data, and the possibility of providing tracker loans in future, that follow the cash rate.
Thorburn also defended the bank’s ability to address cultural issues without an external tribunal to keep Australia’s banking sector honest.
Investigations in March revealed that the Commonwealth Bank’s insurance branch, CommInsure, had rejected multiple claims that staff had been sacked over their practices, despite evidence they were legitimate.
CommInsure ignored the findings of police and coroner’s report and refused a payout for a woman who died of an accidental prescription drug overdose because it decided she had taken her own life.
CEO Ian Narev says CommInsure has changed its definition of heart attacks since the scandal and retrospectively paid 17 account holders.
The Commonwealth chief also faced questions about the company’s financial planning scandal, which saw customers lose hundreds of millions of dollars.
Narev said he was open to making it easier for customers to change financial providers and open to the Coalition’s idea of establishing a tribunal people with grievances against banks.
He said it was likely more customers would be able to access compensation.
“Critics will paint these as signs of ongoing problems,” he said.
“Actually they are signs of how serious we are about fairness.”
Narev said it had reviewed the financial advice given to 6,000 customers as part of its response to financial planning scandals.
He conceded the advice provided in more than 10% of cases was not correct, resulting in those customers receiving $11 million.
Australia’s financial regulators will face questioning by the Parliamentary economics committee following appearances by the big four banks.
The banking regulator, the Australian Prudential Regulation Authority, as well as the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission will be called upon to answer questions from the committee in three separate hearings.
However, the Labor Party argue that an inquiry is not enough and that a royal commission into the banking sector be conducted.
– Maggie Triantafillou, Editor (Oceania)