Life on the West Island - Still banking on it

West Island governments and corporate regulators have a long history of wringing their hands about the greed of the banking industry and its exploitation of customers, and there have been numerous studies and inquiries about what to do about problems in this sector, which is dominated by an oligopoly of four huge banks.

In 2019, the Hayne Royal Commission handed down a devastating report into misconduct and exploitation by the Big Four, highlighting illegal and unethical behaviour and making 24 recommendations for systemic change. In the five years since, a few senior executives of the banks have resigned or been removed, usually departing with multi-million-dollar golden handshakes. But despite revelations of banks facilitating money laundering by criminal syndicates and exposure of gross overcharging of their most vulnerable customers, there has not been a single prosecution of any managers or staff of the Big Four.

This week, a new banking scandal was revealed, as reported in Crikey by economics journalist Bernard Keane, among many others:

Maybe we can't expect banks to refrain from sickening stuff like robbing dead people. You’d be entitled to think, after the banking royal commission’s exposure of banks and AMP charging dead people fees, that our banking oligopoly would ensure it never happened again — if only from a public relations perspective. Nothing so sums up the image of bank bastardry as that of hugely profitable financial institutions robbing the dead.

Of course, you’d be wrong. ANZ — which managed to get through the Hayne Royal Commission relatively unscathed — was yesterday outed by the banking oligopoly’s own industry “regulator”, the Banking Code Compliance Committee (BCCC), for charging fees to dead customers. ANZ wasn’t the only bank doing it, either, but the BCCC chose not to name the other perpetrator — apparently naming banks who rob dead people is the most serious sanction it has.

But as always with banks, wait, there’s more. Not only did ANZ charge dead people fees between July 2019 (five months after the banking royal commission ended) and September 2023, but according to the BCCC, ANZ failed to respond to instructions or requests for information from representatives of deceased estates within the 14-day timeframe laid down in the banking code.

And then ANZ took its sweet time doing anything about the problem. “Despite first identifying the issues in early 2022, ANZ took over a year to implement solutions and then nearly two years to start its customer remediation program, which is still ongoing and expected to be finalised by the end of July 2024,” the BCCC said. That’s five years after it first started robbing dead people.

What an utter disgrace. Was ANZ paying any attention during Hayne? Does it just not care? Or is the cost of having systems that don’t rob dead people going to take too much off the bank’s bottom line — a profit of $7.4 billion for 2023?

It is particularly ironic that the revelation of ANZ Bank charging fees to dead customers came in the same week that regulators and the federal government waved through the takeover of Suncorp Bank by ANZ, a step which will further increase the power of the Big Four at the expense of genuine competition. The customer-owned Bendigo and Adelaide Bank had attempted to merge with Suncorp but was rebuffed when the ANZ takeover was approved. Many commentators have questioned why the ANZ deal was approved at a time when it was revealed to be exploiting deceased customers. Bernard Keane was among the loudest critics:

The ANZ revelation is perfectly timed to show [Federal Treasurer] Chalmers’ decision is every bit as rotten as the banking culture he’s rewarding. ANZ buying Suncorp’s banks is a classic case of lazy Australian capitalism. Our major markets are dominated by oligopolies or monopolists that consume competitors and prefer extracting regulatory favours over innovation — and ANZ has done both with Chalmers’ timid protections for bank jobs for three years and a demand that the bank “enter into an agreement with Google for ANZ and Google to work with Queensland universities on curriculum initiatives”. Seriously. You want a curriculum initiative, treasurer? How about Economics I and the benefits of competition?

While Chalmers was preparing that nonsense, the banking industry’s own internal regulator was working out that “the significance of the deficiencies in ANZ’s compliance frameworks was deeply concerning”. Did Treasury or Chalmers’ office actually contact the BCCC in the lead-up to his decision to check if there were any significant regulatory issues with ANZ? What about ASIC or APRA — the two financial regulators found by Hayne to be not just asleep at the wheel but downright comatose? Were they aware that at least two banks have yet again been searching the pockets of dead people?

It pays to remember what Kenneth Hayne said about incentivising misconduct:

“Rewarding misconduct is wrong. Yet incentive, bonus and commission schemes throughout the financial services industry have measured sales and profit, but not compliance with the law and proper standards. Incentives have been offered, and rewards have been paid, regardless of whether the sale was made, or profit derived, in accordance with law. Rewards have been paid regardless of whether the person rewarded should have done what they did.” That’s exactly what Chalmers is doing by ticking off on ANZ expanding the big four banks’ oligopoly.

It seems that West Island governments have learned little since the damning findings of the Hayne Royal Commission. The myth of the Big Four being “too big to fail” has morphed into blind acceptance of their questionable behaviour, at the expense of the population at large. This is contributing to the growing inequality in our nation and adding to the cost of living crisis facing ordinary West Islanders.