JIM COOMBS. Alternatives to the “big four.

Sep 8, 2018

The AFR reports Mark Carnegie of the Superannuation Trustees saying that their funds could move into  High Street banking as the Big Four retreat after being found with their hands in the cookie jar. Even Auspost could pile into the market !

Well, of course, he’s right. But the “big four” have to be told by the regulators that their way of doing business is unacceptable. This very day they engaged in collusive pricing with their interest rates. Can’t they SEE ? Can’t Rob Sims See ? Just the other day Westpac “did a deal” for a $38m penalty for deceiving and robbing its clients. A drop in the bucket for them, a disgrace for Rob Sims (who incidentally doesn’t think the petrol price cycle is collusive pricing – well what else could it be, they all change their price on the same day, we surely can’t be waiting for a document that says that). For such a flagrant theft from the clientele, the penalty must HURT. Next time withdrawal of licence, and a fine of at least their last two years profits, with a warning to investors that institutions who flagrantly breach the law may have their opportunity to operate in the market taken away, at the risk of the shareholders.

But Mark Carnegie is right. The Big Four are not inevitable and were nothing in times gone by. He also suggests that, along with the opportunity available to Superannuation Funds, Auspost is well placed to take a place in the retail bank market, as it has, to a degree, in the UK. (as an aside I cannot refrain from telling readers that I made a submission to the Campbell Inquiry into the Financial System all those years ago, i.e., 1970s, that a Post office Bank and Gyro should be adopted here, successful though they were there, to be told that our banking system was good enough ! ) 

So what to do ? Well Rob Sims of ACCC and ASIC have to become genuine regulators. If they believe in “free markets” then they must punish anticompetitve behaviour in the market by the banks, however big  and too-big –to-fail they might believe they are, and especially illegal (money-laundering, inadequate surveillance of dubious transactions) and exact penalties which make them behave. As there is no 007 licence to kill, there is no bank licence to fleece their clients. What we need is regulators like the Mikado who want to make the punishment fit the crime, Too late to make them the butt of “innocent merriment”.

It is clear that the Banking Royal Commission has shown that these institutions cannot be trusted to do the right thing, so they must become transparent, no “commercial in confidence”, the people and their representatives have to be reassured that what is being done is honest and above board. No “industry code of practice” will now do.

But as Mark Carnegie (from the superannuation trustees), Nicholas Gruen (of the People’s Reserve Bank) have amply shown, we can do better, and not be ripped off.

Jim Coombs is a nearly retired magistrate and economist with a bit of knowledge about the banking business

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