The bell can’t be unrung for the Australian banking and financial institutions.
The revelations from the Banking Royal Commission detail the horrors of a deeply entrenched and systemic culture of dishonesty within the country’s biggest financial sector.
Allegations of predatory lending, companies repeatedly lying to regulators, malpractice and bad behaviour show a widespread failure in one of our most trusted institutions.
Profit from the people—not for people was the mantra adopted by Commonwealth Bank (CBA). But in 2016 it became embroiled in a financial advice scandal that stopped the bank in its tracks.
The insurance arm of the bank, CommInsure, was found to be ripping off clients with outdated insurance policies, leaving patients such as James Kessel on death’s door-unable to claim life insurance coverage.
In 2016, James Kessel was 46 when he suffered a severe heart attack that saw nurses put him on a defibrillator to bring him back to life after his heart stopped.
Kessel had been paying into a CommInsure trauma policy for a majority of his life which covered him for heart attacks worth up to $1 million.
This policy was supposed to cover him when he nearly died of a heart attack in 2014.
However, when Kessel lodged his trauma claim, the application was rejected because it didn’t meet CommInsure’s definition of a heart attack.
According to CommInsure Kessel didn’t have enough protein in his blood called Troponin.
The CommInsure policy was outdated and not in line with medical practice.
CommInsure knew it was not acting in the best interests of their client.
But acting in “utmost good faith” is a legal requirement for insurers when it comes to assessing claims.
Something, former CEO Ian Narev admits may have been out of date at the time.
“The policy needs to be updated and is being updated and that work has been ongoing now for a number of months and we’re going to make sure we accelerate it now to update the definition,” he said in a joint interview with Fairfax and Four Corners.
However, this is only one of many scandals spanning over a decade that paint a disastrous picture of mistrust and ineffectiveness to the public, with no clear direction for change within the backbone of the company.
In 2009, the CBA was slapped on the wrist with a $100,000 fine for their failure to comply with disclosure obligations under the Corporate Act.
CBA not the only bank in the picture
Two years later, a fund manager at Macquarie was jailed for a two-and- a-half year jail stretch for insider trading.
In 2012, Macquarie was found in breach of compliance standards, with 80 per cent of the banks’ client advisors in violation.
In 2015, ANZ was forced to repay customers $30 million in compensation, after clients were sold advice packages but did not receive the services.
In the same year, Westpac were also sued for deceptive conduct, after the bank lost $4 million in savings of a former client.
In 2016, CommInsure’s Chief Medical Officer blew the whistle on unethical practices within his own department.
A year later, CEO Ian Narev stepped down due to money laundering allegations within the CBA.
The financial sector—riddled by a culture of cover ups and deception—strongly advocated against a royal commission; the institution was sacrosanct.
Treasurer Scott Morrison refused to apologise for resisting a banking inquiry, defending the banks as “rock solid”.
But former Reserve Bank Governor Bernie Fraser, who once rejected calls for a Royal Commission, now concedes we need one due to “a cesspool” of misbehaviour.
The poor track record of the banks, created by an avoidance of corporate responsibility, set not only a dangerous tone for the banks, but also the staffers.
Board members refusal to admit their misconduct and nightmarish treatment of whistleblowers sent a strong message to employees: cover up and complacency is a culture practiced and protected in the Australian banking sector.
In light of the Royal Commission’s findings, Australia’s corporate regulator has revealed 90 per cent of financial advisors ignored the best interests of their clients.
Australian Mutual Provident (AMP) also admitted it deceived corporate regulator ASIC over fees charged to thousands of clients who were not provided with a financial service.
As the big four banks sit with their head in their hands, the public watches on as they sulk through the doors into a long overdue inquiry.
Given the Royal Commission’s strict time frame, the inquiry will only investigate what it can, rather than what it needs to.
Misconduct this deep and consistent warrants an overhaul of the system, starting with sincere accountability from the top. The cycle of unethical and unregulated behavior thrives in the current climate.
We need a much deeper probe into the heart of a more profound problem at the crux of Australia’s banking culture.
Let’s hope the Royal Commission gets the chance to do more than just scratch the surface of this banking issue.