Let’s recall the revelations of the Banking Royal Commission so far, via UBS:
Fraud and Bribery
Counsel Assisting, Ms Rowena Orr, QC: “I want to put to you is that NAB knows, & you know, that there were unsuitable loans, there was false documentation, there was dishonest application of customers’ signatures on consent forms & there was the misstatement of some loans in loan documentation.
The whistleblower is recorded as saying: ‘One customer recently said at a particular branch, they told him he could borrow $800,000, but the valuation was only $450,000. The whistleblower said the money exchanges hands in cash, in envelopes, white envelopes usually over the counter. Money is deposited at CBA, so NAB can’t detect the deposits’. Now, this is the information provided by the second whistleblower. Is that right?”
Mr Waldron, NAB – “That’s correct”
Counsel Assisting, Ms Rowena Orr, QC – “And the whistleblower tells NAB that these people are making up fake payslips, fake ID, fake Medicare cards … They charge $2,800 bribery for each customer for home loans”.
Failure to verify customer income
Counsel Assisting, Ms Rowena Orr, QC – “And it wasn’t just the fact for Mr Meehan, that had submitted more than 50% to a single lender; it was also the fact that the particular lender that he had submitted them to was Westpac because Aussie [Home Loans] had formed the view that the credit assessment processes at Westpac were more lax than at other lenders; is that right? Aussie had formed the view that the fact that they [Westpac] were just requiring a letter of employment, as opposed to payslips, would be something that brokers would become aware of to be easier to provide the documentation that was necessary. And do you mean, by that, a letter of employment is an easier document to falsify?”
Lynda Harris, Aussie Home Loans – “Yes”.
Failure to assess customer expenses
Counsel Assisting, Ms Rowena Orr, QC – “The first issue I think that’s worth mentioning this across home loans…it’s a lack of questions & verifications about expenditure. When we ask for copies of their assessment, is that it looks much more likely that a benchmark has been used than they looked at the consumer’s actually expenditure, which can vary considerably from a benchmark figure. There is also very little evidence that expenditure has actually been verified in any way.”
Mr Ranken, ANZ – “ANZ recognised there were instances where it lacked evidence to show that genuine inquiries had been made”
Failure of internal controls
Counsel Assisting, Mr Dinelli – “The remediation paid demonstrates that processing errors occur across a variety of credit products. They occur predominantly by reason of the application of automated processes, but human errors left unchecked often underlie them.”
Mr Van Horen, CBA – “It was the error we made in our serviceability calculation and the mapping the data flows … without overstating it, doomed to fail … having robust change processes, I think, was our failing and it’s clearly an area of ongoing work.”
Failure to report misconduct to ASIC
Counsel Assisting, Ms Rowena Orr, QC – “NAB knew enough to sack five employees for dishonesty and for conflict of interest, is that right? It knew enough by November to sack people for those reasons. Are you telling me it didn’t know enough to tell ASIC that there was a problem?”
Add the BBSW, forex, insurance and money laundering scandals and the only thing left that Australian banks have not corrupted is financial advice. Oh wait, from the AFR today:
In the late 1990s, it was impossible to talk to the chief executives of the big four banks without hearing of their lofty dreams to transform their institutions into financial supermarkets – a one-stop shop for all the banking, insurance and superannuation products their customers could possibly desire.
…But all four banks discovered that their pipe dreams of generating large revenue streams by manufacturing their own investment products in-house, and then using their extensive branch networks to sell them to their customers, were extremely difficult to translate into reality.
Faced with disappointing earnings streams, the banks had to find other ways to squeeze sufficient profits out of their funds management businesses…
Namely, charging customers for breathing. Also at the AFR:
AMP, CBA, NAB and Westpac have admitted making payments that were outlawed five years ago under reforms designed to clean up conflicts in financial advice.
…Vertical integration is a hot topic for the inquiry given five of the major groups operate this model, and corporate regulator Peter Kell, who also gave evidence to the commission on Monday, said it was “inherently conflicted”.
…AMP admitted paying so-called “prohibited conflicted remuneration”…Commonwealth Bank subsidiaries Count Financial and Financial Wisdom admitted its advisers also received prohibited conflicted remuneration…NAB admitted providing free support services to advisers who recommended particular bank products…
They were also charging customers “fees for service” that were never delivered, at The Australian:
Financial services powerhouse AMP has admitted to misleading the corporate regulator at least 10 times over a seven-year-long rort, under which it charged tens of thousands of customers fees for services they did not receive.
AMP initially told the Australian Securities & Investments Commission that the “fees for no service” were charged by mistake. But yesterday the company admitted to the financial services royal commission that some of the bogus charges were deliberately levied and it had not been honest with customers.
The royal commission yesterday also heard that AMP — sometimes described as the fifth pillar of the financial system, after the big banks — had since 2009 developed “serious compliance concerns”, a phrase used by ASIC to include fraud and dishonesty, about 81 financial advisers.
Here is one answer, from Chanticleer:
The awful revelations about the propensity for companies to lie to the regulator and the willingness of financial planners to put their interests ahead of customers ought to prompt royal commissioner Kenneth Hayne to make findings about the remuneration practices at the upper levels of the major banks and AMP.
…One solution available to Hayne, which is probably being considered by Byres, is to demand that boards of directors use their power to cancel or amend deferred bonus payments. These clawback provisions have rarely been used in Australia.
I’ve studied in detail the intense corruption of US banking behind the GFC and there is nothing above that would not fit right in.
The Royal Commission is now in danger of under-delivering solutions because Australian bank corruption is so systemic that tackling it is like trying to swallow an elephant.