MICHAEL PASCOE. And the winner is … the big banks (New Daily)

Who would have guessed? The banks have emerged as relative winners from the royal commission’s final report.

Winners, that is, compared with the fear and loathing that surrounded them at the time of the interim report.

Oh yes, there are some untidy details to be cleaned up, some hundreds of millions of dollars in compensation to be expensed, some court cases ahead as ASIC tries to find its teeth, maybe, maybe even a criminal charge for someone.

But that’s small beer compared with what Commissioner Kenneth Hayne did not recommend and what a lot of commentary had feared.

And there are two outright winners for the banks if all the recommendations are implemented.

The obvious one – and perhaps the recommendation least likely to be implemented – is to scrap mortgage brokers’ trailing commissions. That would save the banks many, many millions.

The idea that brokers could easily make up the difference by charging their clients bigger fees or getting larger initial commission from the lenders is somewhat fanciful.

Remember that CBA testimony egged on Commissioner Hayne’s impression that trailing commissions were “money for nothing”. It actually isn’t that simple.

The mortgage broker system is not perfect, but the banks – not customers – will be the winners if the brokers are whacked as Haynes suggests.

The second big win for bankers is less obvious, but more important.

The Hayne royal commission provides an opportunity for our most important institutions to rule off the past few decades during which principle gave way to greed, self-advancement and hubris.

Commissioner Hayne has given bankers the chance to become professionals again, instead of being the spivviest of salespeople.

At their core, our banks are glorified building societies, making the obscene over-payments in the C-suite all the more risible.

No, you don’t have to be a genius to take over running a member of a rich, established, effectively government-guaranteed cartel.

Owning their history, and cleaning out dud and dumb boards and mediocre management, could take bankers back to where they were in the community.

There are other relative wins.

Commissioner Hayne didn’t touch vertical integration – a huge relief for AMP and Westpac, the latter having gambled on this outcome when CBA, ANZ and NAB had already jumped.

And unconscionable lending restrictions have not been extended.

There’s more in the detail, of course, but here’s a big opportunity for the banks – if they’re smart enough to take it.

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2 Responses to MICHAEL PASCOE. And the winner is … the big banks (New Daily)

  1. Greg Bailey says:

    The release of the report of the Royal Commission into banking must be a relief to the big banks and their executives. It would be unfair to call it a complete whitewash, because it did succeed in putting some pressure on the banks whilst it was ongoing, if only because of the human-interest stories that were publicized. Now that it has been completed the banks, through their spokespersons such as former Labor premier Anna Bligh, can say they are responding vigorously to the commissioner’s recommendations and that banking culture will change. But, how will culture be defined, who will be there to monitor the changes and how will the effectiveness of any such changes be measured.

    In an economy that has become substantially financialised–money being made out of money–and where there are very regulative bodies, whose ideological thrust is similar to the corporate bodies they are overseeing–little substantive will change. Yet under the pretext of agreeing to do something–as vague as this will be–the pressure will now be off the banks, and that will give them a sigh of relief.

  2. Malcolm Crout says:

    I’m not so sure the Banks have dodged a bullet. While the share prices have boosted after the limp RC report, the worm will slowly turn and gather speed when the ALP gain power and the community continue to demand heads on platters. I expect it to be a major plank in the upcoming election campaign from whence the payback to the Banks will gather pace. I would not be in the least surprised if the ALP propose an extended new RC to follow on from the last hastily conducted and under resourced effort.
    APRA and the ACCC have been exposed, so those dodgy undertakings will disappear and more likely some court cases will throw a couple of banking criminals in jail. This will send a message – expect the share market to follow South in quick time. THey will pay. Just not right now.

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