The Financial Services Royal Commission has accused CBA and NAB of crimes in relation to their gouging of superannuation accounts. Counsel assisting Michael Hodge QC concluded in a 223-page report released on 24 August that it is open to Commissioner Kenneth Hayne to find that CBA committed more than 13,000 crimes, and that NAB was in criminal breach of its duties under superannuation law.
Hodge also took aim at the regulators, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). He said the evidence indicated “that the approach of neither APRA nor ASIC to regulation of superannuation entities is sufficient to achieve specific or general deterrence. The evidence suggests that APRA is reluctant to commence court proceeding and to take public enforcement action. … It might be thought APRA’s objective of ensuring financial system stability is not readily reconciled with being an effective conduct regulator.” (Emphasis added.)
The spectre of criminal prosecutions is a culture shock, given how few bankers in Australia and around the world have gone to jail for the myriad crimes in the banking system in recent decades. But even jail is not enough of a deterrent to fully protect customers from financial predators.
While paedophiles know they will be jailed if they are caught, we still take precautions to keep them away from children, such as requiring working-with-children clearances for staff in childcare centres and schools, because a deterrent is not enough to guarantee against abuse. Likewise with banks. Jailing bankers to send the message that financial predators will be punished if they steal, defraud or gouge bank customers’ savings is very important, but many bankers would still be tempted to prey on depositors. In most cases, bankers rationalise their actions because they don’t put the money they gouge from customers directly into their own pockets, but into the bank’s profits, which earns them fat bonuses. Also, they can employ armies of lawyers to tie up prosecutions in the courts.
The only way to protect depositors from financial predators is to change the structure of the banking system to lock predators out.
The banking royal commission has already proved that the structure of the banking system, and of regulation, is responsible for the scale of the criminality and misconduct that has been exposed. The major banks are conglomerates of all types of financial services, including traditional commercial banking, investment banking, insurance, wealth management, financial advice, stock broking and superannuation.
This integration of financial services has enabled banks to: prey on the trust of their depositors to lure them into all sorts of risky investments and unnecessary products; overcharge their retail superannuation funds for services provided by other divisions of the bank to the tune of $15 billion per year; and use deposits to collateralise risky investment-banking speculation in securities and dangerous derivatives.
Bank regulation is structured to accommodate this criminality and misconduct. Previously the banks were regulated by a single authority—originally the Commonwealth Bank when it was Australia’s national bank, and then the Reserve Bank of Australia (RBA). Now regulation is shared between APRA, ASIC, and to a lesser extent the RBA and the Australian Competition and Consumer Commission (ACCC). This regulatory structure leaves gaps in which much banking misconduct is missed, while APRA and ASIC constantly pass the buck to each other.
This obvious ineffectiveness is not incompetence, but by design—it reflects the neoliberal belief in self-regulation that has been the consensus in Australian and world politics. The regulators are a fig leaf for no regulation.
The only measure that will protect depositors is the Banking System Reform (Separation of Banks) Bill 2018 that Bob Katter MP introduced in Parliament on 25 June, for a Glass-Steagall structural separation of deposit-taking commercial banks, from risky investment banking and all other financial services. Contact your MP to demand Parliament debates this bill.
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Contact your local MP and as many Senators as you can, via phone, email or mail, to demand they debate the Separation of Banks bill. (You can find the Senators from your state by clicking on this link https://www.aph.gov.au/Senators_and_Members/Parliamentarian_Search_Results?q=&sen=1&par=-1&gen=0&ps=0, and clicking on your state under the heading State/Territory on the right-hand side.)
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