1. Banks behaving badly
When criminal charges were brought against ANZ and investment banks Citi and Deutsche Bank that sounded fair enough to me. Barbora Jedlickova, Lecturer in the School of Law at The University of Queensland says that criminal charges are more effective than fines and:
- Charging high-ranking bank executives will potentially make the deterrent more effective still, because high-ranking executives set the cultural tone for their organisations.
James Thomson in his Chanticleer column at the AFR says that victims are hard to find in this case, but it is a good idea because bankers should behave themselves.
I think Rod Sims at the ACCC is perhaps sending a message that he is going to be an active regulator.
2. Banks ignoring bad behaviour
The Commonwealth Bank was basically guilty of doing nothing at all when crims were stuffing ATMs with thousands of dollars of ill-begotten gains. The CBA has now agreed to pay a whopping $700m fine for anti-money laundering, terror financing law breaches.
It is actually hard to see that anyone inside the bank benefitted from this, but senior staff including the CEO have been given the flick because it happened on their watch. I’m not sure that they knew it was happening, probably not. Internally the bank has spent $400 million on technology and people to try to make sure there is no repeat.
- the statement of facts agreed by AUSTRAC and CBA state that the bank did not deliberately or intentionally violate its legal obligations under the relevant laws.
- The size of CBA’s penalty seems to be more in line with banks that have deliberately flouted money-laundering laws, rather than the smaller punishments handed to banks that did so unintentionally. It is tempting to conclude that this is influenced by the current prevailing mood to “send a message” to financial institutions.
What’s more, we cannot necessarily assume that the fine will act as a deterrent. The penalty is not paid by the CBA staff who acted wrongly; it is paid by the bank, ultimately by the shareholders.
He says there are also likely to be higher charges to customers to cover the cost of compliance.
I can tell you that my broker has downgraded the earnings per share forecasts, so that the earnings will be basically flat for the next three years.
There was some commentary that the uptick in the share price showed that the penalty, less than 10 per cent of profits, was not enough. That ignores what happened to the share price since the story broke:
CBA lost about 20 per cent of its value since the story broke. The small uptick just means the market anticipated the outcome and got it about right.
By the way, if you look at the whole story the bank is worth no more now than it was six years ago:
and will, if things work out well, be worth about the same in three years time. The banking business is now a bit harder than it looks.
3. Bank routinely harming people
ABC RN’s program Background Briefing did a story Macquarie’d – The advice scandal at Australia’s fifth-largest bank (transcript available).
One example was a couple who sold a property near Swan Hill in northwest Victoria for $2.7 million. It had been built up in the family over three generations, but the farmer was tired and wanted to retire.
Macquarie’s wealth management people actively traded the proceeds, extracting $700,000 in fees while they turned $2.7 million into $450,000 before the couple pulled the plug.
Another, a man called David got $300,000 as compensation for a work injury which was supposed to set him and his family up for life. Sounds not nearly enough to me, but Macquarie leveraged it to borrow $12 million (can’t get my head around that one), and in three years to 2007 turned the net amount into nothing. Amazingly Macquarie did not stop until David blew the whistle.
Then they flew him to Sydney, admitted they had stuffed up and offered $25,000 in compensation. He said, Open the window so I can jump out, refused, got a lawyer and in the end got $175,000.
The program says there are a million people out there who manage their own super, and a pot of money worth in total $700 billion, more than the GDP of Sweden.
My understanding is that the banking inquiry has found that there is a lack of professionalism in the advice industry. Anyone can hang up a shingle. I’d have to say, though, that I was surprised and more than a little shocked at how fast and loose Macquarie has played it, having had a relationship with them for over 20 years. My experience could not be more different.
4. The NDIS: how do you turn a brilliant idea into a working program?
Emma Griffiths has found her niche on local radio in Brisbane in the program Focus. Topics are sometimes local, but sometimes have national interest, I think. Last Thursday the topic was How will the NDIS affect you?
The impression given was that if you got a competent assessor the results could be brilliant. If not they could be simply god-awful. Seems there is an attempt to hire people who have some understanding through life experience of disability. However, there seems to be no dedicated training program for the role.
Another huge problem is that services are meant to be provided competitively by private enterprise. Seems the larger corporates are giving the sector a swerve – too hard and not enough money in it. Smaller providers are popping up and going broke every day.
As an aside Emma Griffiths is one of our beloved ‘giggling females’. They are actually very competent.
5. Elsewhere on the ABC
Elsewhere on ABC Radio I was interested in Tom Switzer’s discussion with Professor Kishore Mahbubani, former Singaporean ambassador to the United Nations, Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore and author of The Great Convergence: Asia, The West and The Logic of One World. :
- The West’s two-century epoch as global powerhouse is at an end. A new world order, with China and India as the strongest economies, dawns. How will the West react to its new status of superpower in decline?
Mahbubani said the most important international event of 2001 was not the destruction of the Twin Towers on 9 September, it was 11 December when China joined the World Trade Organisation, adding 800 million workers to the world capitalist economy.
Modern civilisation would not have been possible without the European contribution of the Renaissance, the Enlightenment, the rationalism, pragmatism and science of the 19th century. Fukuyama was wrong, however, when he declared history at an end. The West fell asleep while the East woke up.
He said Australia is going to find it hard to adjust – basically we are European, but live and work in an Asian region. We are going to have to maintain our own middle path, he says.
Then there was Alex Haslam – Professor of Psychology and ARC Australian Laureate Fellow, School of Psychology, University of Queensland on The health effect of social contact.
Seriously, he says you will be healthier and live longer if you join a group, or more than one especially when you retire. He says friends and family don’t count, because they don’t stretch us in the same way. He seems to be saying that a modicum of social stress is good for us.
6. The ABC is a political issue
- Bill Shorten rose in Federal Parliament on Thursday afternoon last week to give a rousing defence of the ABC. An hour later, an email arrived in ABC managing director Michelle Guthrie’s office from Communications Minister Mitch Fifield.
“The Labor Opposition with me as leader will defend the independence of the ABC, and a Labor government with me as prime minister will defend the independence of the ABC”, Mr Shorten told Parliament.
Senator Fifield, by comparison, wanted to complain.
The complaint? That several ABC journalists had retailed “the Labor lie” that the Government may have chosen the dates of five looming federal by-elections for political reasons.
Apparently an article by her was the problem, though the complaint only went to the ABC, not to Fairfax, where it was also published.
So she asked around:
- A Labor person said: “Well, there is the budget cut to the ABC, so that is worth talking about. But, people in regional Australia, for example north-west Tasmania, love the ABC, even if they don’t like Labor. So it doesn’t hurt to say we are on side.”
- Asked why the Communications Minister should launch a complaint against not just political editor Andrew Probyn, and me, but Insiders host Barrie Cassidy and implicitly two Insiders panellists who don’t even work for the ABC, Phil Coorey and Mark Kenny, the response from people inside the Coalition was equally pragmatic.
“You’ve got to play to the base.”
She says the Coalition do not complain about the overt and transparent political antics of News Corp.
- There is plenty for anyone to be irritated about at the ABC, just as you can be irritated by the antics of News Corp.
The difference, however, is that the ABC still strives to deliver a diversity of information, analysis and opinion to its audiences.
Not everyone will always like the opinion, or the analysis. But if it is informed, and informative, it is doing its job.
News Corp has increasingly opted for a marketing strategy that appeals to a narrow political demographic, and one which suits the commercial interests of its owners.
If the ongoing attack on the ABC is indeed driven by market forces, it is time to consider the case that public broadcasting has never been more important as a public good.