“Banking differs from any other form of business, because any action – good or bad – by a banking system affects almost every phase of national life”.
This is a quote from Commissioner Mr Ben Chifley in 1937, during our last Royal Commission into banking, which sought to clarify the role that banks should play in a robust democracy such as ours. It speaks to the kind of far-reaching implications that the conduct of banks has on Australian people from all social strata, and on our national psyche more broadly.
Fast forward 71 years, and our banking sector is in a sorry state. We’ve ticked over into the sixth month since the Royal Commission into banking, superannuation and the financial services was established, and each new week seems to be ushered in by more unsettling stories. Last week the Royal Commission heard the story of a farmer who had suffered a serious heart attack, only to be defaulted three weeks later by ANZ. Earlier this year it emerged that Commonwealth Bank had been charging fees to dead clients.
So often in newspapers and on television, banking is about CEOs, shareholders and profit. Now, as revelations of systemic wrongdoing continue to come to light, we are hearing the stories of Australians who have been swindled and fleeced by big banks. We have witnessed how the costs of unconscionable banking are borne by real (and often vulnerable) people in our communities, reminding us once again of the scope for banking to affect almost every phase of national life.
ANZ Chief Shayne Elliott recently conceded that, in his experience, bank workers tended to dehumanize the work they did – “less than 20 per cent of them ever see a customer”, Elliott points out. “It’s easier — and I’m not excusing it, I’m not rationalising it — to say, ‘well, I can put up a bit of a mask…the rules said I have to do this, the rules say I have to repossess the farm — it’s difficult for me to emotionally engage in that situation”, Elliott said.
It seems that big banks, driven by an entrenched culture of corporate complacency, have lost sight of their customers and their needs. So, harking back to 1937, the question once again becomes – what kind of banking sector do we want?
Intuitively, a common response would be something along the lines of ‘one that is more human’ or ‘more ethical’. According to Stuart Palmer, Head of Ethics Research at wealth management company Australian Ethical, we need companies that “take into account all of the interests of people, animals and the environment”.
Australian Ethical is one company within the financial services sector that is making it easier for consumers to take a stand against unscrupulous banking, using their superannuation to support more ethical companies and withdraw support from companies that don’t operate sustainably. They have recently divested from AMP, after the Royal Commission uncovered systemic prudential and cultural issues within the company.
Australian Ethical determined that AMP’s misconduct – which included charging fees for no service and knowingly deceiving regulators – breached the ethical charter that informs their investment decisions.
Palmer admits that bringing the banking sector in line with community expectations will not be a quick fix – it will require both sustained external pressure from consumers and internal reform from within the industry.
“Consumers are right to be sceptical about the big banks”, Palmer says. “The sad truth is that we need to be distrustful, and we should do what we can to educate ourselves to make informed financial decisions”. Australians are no strangers to distrust – in 2018, the Edelman Trust Barometer identified Australia as a country suffering from a pervasive distrust of institutions. On this metric Australia sits only 4 percentage points above Russia, the world’s least trusting country.
But when it comes to recalibrating our banking sector, change must also come from within. It shouldn’t be the responsibility of Australian consumers to fix broken banks; “Financial institutions need to rebuild trust and demonstrate their commitment to design and sell their products in a way which promotes the interests of their customers”, Palmer says.
“Companies need to take action on many fronts: increasing transparency and simplicity; changing employee incentives, including increased accountability for misconduct; addressing conflicts of interest; and investing in technology which safeguards high quality financial products suited to the needs of individual customers”.
Given the litany of accusations that have so far been levelled against senior executives, appearing among the 7,000 submissions that have been received thus far, the road to reform will be long. It will take more than a couple of resignations. But the Royal Commission has set the ball rolling toward what we all hope is a more human, more ethical banking system.