If making a buck is key, then the buck always stops at the top

It is surely ironic that Westpac is the wokest of the woke big banks.

It was early out of the blocks in support for climate change initiatives. It is big on supporting diversity and inclusiveness. The bank loudly supported the marriage equality campaign. Indeed, an internal email pushing for a “yes” vote claimed that 3000 suicides annually would be avoided.

The bank’s board has four women, although some of the members of the board appear to have very little actual banking experience.

Yet when it comes to the day-to-day functions of banking and ensuring compliance with laws in relation to anti-money-laundering and dubious international transactions, it’s not so good.

Just take a look at the numbers. The Commonwealth Bank was pinged for almost 60,000 Austrac breaches and paid a fine of $700m. Westpac has been found to have been party to 23 million breaches.

A fine of well north of $1bn is surely on the cards.

It is quite extraordinary that Westpac would enter into arrangements with various foreign banks without undertaking thorough due diligence and without the processes to identify dubious transactions.

But making a buck seemed to rank higher than these considerations.

Apart from doing the right thing by refusing to be party to dubious transactions, there are two principal reasons why Westpac and the other big banks have to clean up their acts permanently.

Currently, there is a huge diversion of resources within these banks to calculate and execute restitution for wronged customers. This is productivity-sapping stuff but must be done.

It is also a major distraction from what the banks should be doing — serving customers and offering loans on mutually acceptable terms. There is little doubt that the banks’ sluggishness in issuing loans, in part a reaction to the unclear principles of responsible lending, is weighing the economy down.

Given the big banks’ dominance on the stock exchange, what happens to the banks matters a great deal to direct and indirect investors.

The share prices and the franked dividend streams are of considerable concern to many Australians.

But short-term behaviour won’t work if it involves a failure to invest appropriately in new technology and to ensure legal compliance can be assured by the banks’ systems. And let’s not forget that open banking, blockchain and the entry of the likes of Apple Inc into financial services represent a threat to the business models of the big banks.

As far as the future of Westpac chief Brian Hartzer is concerned, it is surely only a matter of time before he is shown the door. Surely wokeness doesn’t negate the principle that the buck stops with the person — OK, guy in this case — at the top?