Let's hear the positive story from the banks

THE public is baying for blood but the big four are woeful at explaining themselves.

IT'S all well and good for ANZ chief Mike Smith to attack the opposition Treasury spokesman as sounding like Venezuela's Hugo Chavez and claim that Joe Hockey has a "personal vendetta" against the banks. Hockey was certainly clumsy in his choice of language when he demanded the government use "levers" to stop banks raising interest rates beyond Reserve Bank rates.

It's fine if the Commonwealth Bank of Australia chooses to poke the Gillard government in the eye by raising mortgage rates beyond the Reserve Bank's official cash rate, as the CBA did last Tuesday.

But as for defending their decisions and their industry, the banks are utterly hopeless at this. Bank bosses need to get out there with more than just attacks against the opposition and the government. If they have a case to make - and they do - now's the time.

In fact, the banks should have done this long ago. You don't need to be a smart banker to see this debate has been brewing. The prospect of an interest rate rise has been on the horizon for months. And Wayne Swan has been issuing various threats to banks if they increased their own rates beyond official rates. Yet, at no stage did the Big Four get on the front foot and make their case.

When the opposition, with the support of independent senator Nick Xenophon, announced the Senate's economics committee would examine bank fees and charges, competition and barriers to new entrants, the ANZ boss scoffed, "And what are they going to inquire about?" Instead, Smith and other bank chief executives should have embraced this as a chance for them to defend themselves.

When Hockey announced his nine-point plan for banking reform, Smith described it as dangerous. "The impact on everyday Australia of what he is proposing is absolutely extraordinary," he said. The ANZ chief uses too many adjectives and not enough detail. Australians aren't stupid. They will understand the impacts and the dangers if Smith can explain them.

When the CBA increased its variable mortgage rate by .45 per cent, almost double the .25 per cent RBA hike, the bank's response was left to an unknown spokesman who assured us the decision was not taken lightly.

"The impetus of the decision was based on the increased cost of funds the bank has continued to experience," said Mr Spokesman. Once again, no detail. By the end of the week, CBA chief Ralph Norris said short-term populism was scaring off foreign investors. While no one should doubt this is the case in the competitive global market for capital, banks need to do much better than these broad brushstrokes.

The banks are entitled to be annoyed by the focus on headline numbers. People talk about CBA's $6 billion annual profit. They talk about the $22bn annual profits across the big four banks. All without reference to the equity invested in these banks and without asking how bank returns on equity compare with other businesses of similar risk profiles. They point to $16m salary packages for Norris without referring to the performance hurdles he has to jump to earn those sums.

But if the banks want to make their case, they could start by using their own set of numbers to communicate some simple messages to borrowers. Explain the basic economics at work, the numbers behind the different sources of funding banks borrow to on-lend to customers. What are the differing costs? Explain the net interest margins. Explain the return on equity and assets. Explain that making banks safer with new capital and liquidity rules comes at a cost. Fight numbers with numbers.

When banks mail out that dreaded note to customers telling them their mortgage payments have jumped by a certain number, add some other numbers, not generalities, to explain why. Putting the details in half-yearly and annual reports is not enough.

Yes, the Liberal Party is the party of free enterprise, but if the banks can't or won't defend themselves, why should others carry the can for them? Compare the miners earlier this year. Kevin Rudd thought a populist super-profits tax on big mining companies would distract us from his about-face on the great moral issue of our time - climate change - and be a sure-fire election winner with middle Australia.

Rudd's mining tax was a disaster from the start, largely because the mining bosses did a stellar job of defending their companies and their industry against Rudd's ill-conceived idea of mining tax reform. With admirably simple language and concepts, the miners fought populism with populism.

But if you want to reach people you have to use language Australians understand. By contrast, the banks send out some unknown figurehead from the Australian Bankers Association to defend their decisions. No one's ever heard of this chap. He's carries no weight with the community and ABA press releases and graphs posted on the ABA website to explain bank profits, fees, competition, customer satisfaction and so on, won't shift this debate.

The call over the weekend for a community forum that brings together the shadow treasurer, the Treasurer and the chiefs of the big four banks may turn out to be just another venue for another round of bank bashing where customers can vent their rage at banks. But the banks will bear the blame for that too unless the chief executives turn up and make their case.

Labor powerbroker Graham Richardson said on Monday that the Gillard government lacks an agenda. The anti-bank sentiment that continues to grow each day that banks shy away from defending themselves will only embolden the Gillard government to make the banks that agenda. A sweet bit of symbolism, which includes indigenous Australians in the constitution's preamble, won't win Labor an election. In an effort to regain control of this debate from Hockey, Swan has already promised a "wave of reform" for banks.

Sure, it's depressing to listen to the simplistic attacks on banks. It's frustrating to see how quickly Australians seem to forget that Australia's AAA-rated banks led the world in best practice during the financial crisis. No bank failures here. No bank bailouts either. Every Australian who has superannuation is a beneficiary of our well-run, profitable banks. There is only one thing worse than a profitable bank. It's an unprofitable bank. That said, if Australia's big four banks continue to play the policy and politics of this debate as poorly as in the past, they will have themselves to blame for Labor's idea of banking reform.