Banks must improve customer service

The federal government’s banking initiatives make perfect sense and could achieve more than a royal commission.

Obudsman Cate Carnell. Illustration: Sturt Krygsman.

The federal government’s banking initiatives make perfect sense and arguably would achieve more than a royal commission, with the one big exception that they look to be a political response to the opposition’s call for a royal commission.

David Murray, who chaired a landmark report on the industry two years ago, noted yesterday: “It’s not a good look when a country has a weakening credit rating, a weakening parliamentary authority and calls for an inquiry into the banks when they are in good shape.

“The people I feel sorry for are the staff,” he added, noting they were doing their best but constantly being attacked.

The bank bosses, with some exceptions, are treading on political egg shells while their main assets, the folk who work in the banks, are being treated as pariahs for no good reason.

It’s commonsense business technique to look after customers by treating staff well, but as much as the banks would argue that is exactly what they are doing, politically the government has kept the spotlight shining on all the wrong areas.

This isn’t helping the banks, but arguably they are not helping themselves either.

A royal commission would be a complete waste of time, but instead we have a series of smaller inquiries, which raises the question of how broken the system is.

CBA has made some attempts to fight its corner, noting that its $3.6 billion tax bill pays for 240 schools, six hospitals and two departments of environment, but clearly the banks need to do more.

Just what game Scott Morrison is playing is another question, when you consider that last year the Treasurer accepted Murray’s recommendation to have the Productivity Commission look at bank competition, but we haven’t heard a word since.

There are several issues hanging around the banks, but many would say lack of competition is one huge problem.

It is not the only one, and of course APRA’s changes to credit weightings will help, but more competition would make the banks fight harder to treat people better.

How much better would it be for Morrison to come out one day and say: we are giving ASIC an extra $30 million a year to look at the banks, we are going to get Ian Ramsay’s review to look at a better banking tribunal to handle dispute resolution, we are going to get Small Business Ombudsman Kate Carnell to look at small business and banks and what rules apply, and we are going to have a landmark review of competition in the industry.

In doing so he would look to have taken the initiative rather than responding to backbench pressure.

The government has done all of the above but dribbled out the announcements over several months in response to the latest potential crisis.

As David Murray says, it is not a good look.

Opposition Leader Bill Shorten is to be commended for keeping the heat on the government, because at least that is generating some action.

Many are confused about what it wants — other than a star chamber in which big business leaders like CBA’s $12.3m man, Ian Narev, are put on the stand.

Back in April when unveiling the inquiry the opposition said it would look at “how widespread instances of illegal and unethical behaviour are within Australia’s financial services industry, how Australia’s financial services institutions treat their duty of care to their customers, how the culture, ethical standards and business structures of Australian financial services institutions affect the behaviour of these institutions, and whether Australia’s regulators are really equipped to identify and prevent illegal and unethical behaviour”.

They are delightfully broad topics, which some would say were already covered by the Murray committee and the myriad of parliamentary inquiries that have concentrated on the industry.

The stockmarket has ignored the political manoeuvring and is far more interested in what APRA’s Wayne Byers has to say about capital rules than it is in what Scott Morrison is asking Cate Carnell to look at.

Carnell’s job is to look at how banks treat some small businesses and what effect the government artillery against the banks has.

Carnell’s role was only established in March but already, with the help of ASIC and others, it is looming as a key change agent in getting the banks to actually look after their customers.

Granted, one would think the banks would do this because it makes good business sense. But they are now big businesses, and in the case of the big four, an arrogant protected oligopoly. The government has separately thrown another $30m a year to ASIC to give it more firepower against the banks, and directed Ian Ramsay’s inquiry into dispute resolution to look at the idea of a banking tribunal to handle disputes, among other measures.

The Australian Bankers Association has itself stepped in with a series of measures, the most interesting being the suggestion that commissions to mortgage brokers be outlawed. It is also looking at bank remuneration, whistle blower protection and bank conduct standards, which are all key issues and better handled through actual decisions than ABA committees.

ASIC is placing a lot of weight on its bank bill swap rate legal action, which is technical but clearly affects all customers.

Rigging of the swap rate impacts interest rate derivatives, which in turn impacts superannuation funds, and in turn retail funds and retail punters. Likewise the cartwheel from the centre of the bank oligopoly flows out to finance company rates and in turn credit card rates. The point being that real people are affected.

On their own any of the above could be written off as window dressing. Sadly, the way the government has responded in a piecemeal approach lends some weight to this interpretation.

But still you might think at some point someone in the banking hierarchy would get the message that maybe it’s time to change the way we operate.

The banks will with some credence argue they are already changing and “we are big businesses, so mistakes happen”, but that isn’t good enough.

As Carnell has noted, in the old days your bank manager gave you a loan and if you had an issue you would talk to him or her. But these days you get put into the problem loan area, which just wants its money back.

Banks need to do better.

We might not have a royal commission but now we have the Ramsay inquiry and the Carnell inquiry. And the latter has just as much power as any royal commissioner, while acting faster.

Selling out

Estia’s Peter Arvanitis was not the only one bailing out of his company’s stock yesterday. with Robert Cooke at Healthscope also selling 1.4 million of the 1.8 million shares he owns, raising $4.3m.

Last week Brambles’ Tom Gorman, who has just announced he is leaving, sold his entire holdings of 652,000 shares raising $8.4m.

The stock closed at $12.89 last Wednesday and closed down 0.3 per cent at $12.34 yesterday.

Punters don’t like the boss selling out, like Bruce Dixon did after hanging up his cue last year at Spotless.

Cooke sold his stock for family reasons, and makes clear to anyone who asks that he is 150 per cent committed to the company and has no plans to leave any time soon.

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