BFCSA: How arrogant is Treasurer Morrison? "The Government knew about, Big Bank Bad Behaviour! Nothing New"

Nothing new in bank royal commission revelations: Scott Morrison

Australian Financial ReviewApr 4 2018 6:33 PM

Aaron Patrick

The banking industry royal commission hasn't uncovered bad behaviour that the government didn't know about, Treasurer Scott Morrison said, raising doubts about the usefulness of an inquiry that could cost the economy half a billion dollars.

Mr Morrison said government agencies had already started dealing with the problems identified by commissioner Kenneth Hayne, which include low-level corruption, kick backs and poor lending standards.

No top bank executive has lost their job because of information exposed by the inquiry, which will cost each of the big four banks an estimated $100 million each, mostly in legal fees, and could cost the government $70 million.

"Other agencies certainly have addressed many issues being raised. I think that will more directly impact on the public consciousness of these things, but they are not things that the government was not aware of," Mr Morrison told The Australian Financial Review Banking and Wealth Summit.

Last year the government gave the Australian Competition and Consumer Commission enough money to create a unit to specifically research and promote competition in the banking industry.

With the threat of a royal commission hanging over them for several years, banks have also been trying to clean themselves up. Sales commissions are being phased out in retail banking after many customers were sold loans they couldn't afford to repay.

But the inquiry has a year to run and new information could emerge that forces the government to respond. It will also be under great political pressure to implement many or all of Commissioner Hayne's recommendations.

"We are seeing a look-back on mistakes the banks have made, and it is an uncomfortable process to go through as a banker, because you feel ashamed of some of the things that you see," Anthony Healy, the head of National Australia Bank's business bank, told the summit.

"My hope for the royal commission is it will come out with sound law reform that takes into account all of the competing interests [between shareholders, regulators and customers] ... and it is well targeted, and balance stability of the financial system, competition and consumer protection."

Ordered up under pressure from Labor opposition, the government was concerned the royal commission could damage Australian banks' image among the foreign funders who provide the capital they need to make loans in Australia.

Mr Morrison said he hoped any damage wouldn't be significant. "The royal commission will go and do its job," he told the summit in Sydney. "I hope the reputational impact overseas is not realised as many fear it might."

David Lindberg, the chief executive of Westpac's business bank, said the industry should acknowledge its mistakes but be proud of its central role in the economy.

"You sit there as an executive and can't help to feel that we were a bit sloppy, and there are things, as a human being, you can't help being embarrassed about," he told the summit.

"But I am worried about the cultural signal to the 150,000 people that work across the four major banks because fundamentally everybody needs to be proud of what they do for a living. We are trying to reinforce the point that banking is in fact, at its best, a noble profession."

Lawyer Richard Harris said the commission had "laid bare" the conflicts with financial intermediaries between banks and customers such as brokers and car dealers.

ASIC executive Michael Saadat said the royal commission had identified the first-mover problem, when banks are reluctant to be the first to abolish commissions or other payments for mortgage brokers because they could lose business to rivals.

Executives from the credit rating agencies expressed concern the commission's findings could lead banks to wind back credit; and they should also get ready for class action lawsuits.

GigSuper co-founder Peter Stanhope said any reputational fall would bolster the prospects of start ups in the super industry. Consumers would "begin to shop around" if trust of larger financial services firms is eroded, he said.