Calls for a banking Royal Commission get louder

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By Leith van Onselen

Calls for a banking Royal Commission are ramping-up once more, with Mark Bishop penning a convincing piece in Fairfax today on systematic fraudulent practices used by Australia’s banks:

It started as just another routine Senate inquiry. Disgruntled clients, serious financial losses, no recourse after many years of trying, banks not interested and ordinary people suffering harm.

Except it still hasn’t ended. Two years later the cry for a royal commission into banking services is a critical backdrop to the forthcoming election…

Despite the multibillion-dollar profits reported even in bad times and supported by government guarantees and licences, I thought the system worked fairly and well.

But halfway through reading many of the hundreds of submissions, I began to get the feeling that something was seriously wrong…

Now I was being told that the financial arms of major banks had engaged in grossly negligent behaviour, fraud, unacceptable business practices and that the losses involved tens of millions of dollars and thousands of individuals…

These activities went on year in, year out. The allegations were almost unbelievable…

[The banks] profited from the scandals and now want to move on, ignore the fraud and blame someone else…

It’s a theme that was explained well by LF Economics’ Lindsay David, who appeared on ABC’s Four Corners last night explaining the 1000-plus examples whereby borrowers’ loan documentation has been forged by the banks (watch from 36.00):

Lindsay David: “There’s a lot of evidence that we have come across that banks are actually fudging the loan application forms of borrowers to make them look a lot more credit worthy than what they are”.

Reporter: “Economist Lindsay David has presented more than 1,100 examples of altered loan forms to Parliament. He says it shows that banks are engaged in predatory, even fraudulent lending”.

Lindsay David: “The banks are literally using liquid paper or other types of ways to clear out the income of a loan applicant and raise it. They are lending to home buyers that have no ability to be able to pay-off their loan and they are basically depending on the property market to continue to rise at a consistent rate”.

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While the Turnbull Government claims that ASIC has the powers to investigate such fraud, why hasn’t it done so already and where are the penalties?

It seems that a banking Royal Commission may be the only way to get to the bottom of the banks’ systemic fraudulent practices. Bring it on I say.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.