Did you happen to notice that the government of Australia had set up a Royal Commission to look into the world of banking? And that the Commission released its “interim” report last week?
What have they found so far, you may be curious to know.
The task of presenting the report fell to deputy leader of the ruling Liberal Party and the nation’s Treasurer Josh Frydenberg who . . .
“ . . . delivered a scathing rebuke to financial institutions for their greed-driven misconduct — and the banking regulator for not doing enough to punish poor behaviour.
“Banks and other financial institutions have put profits before people, greed has been the motive as short-term profits have been pursued at the expense of basic standards of honesty. Too often simply selling products has become the sole focus of attention.”
Frydenberg said the culture and conduct was reflected in the banks’ remuneration practices, with “almost every piece” of misconduct identified in the report “connected directly to some monetary benefit”.
He said the report made it clear that, while behaviour was poor, “misconduct either went unpunished or the consequences did not meet the seriousness of what has been done”.
In his report, Commissioner Kenneth Hayne, QC, said the Australian Securities and Investments Commission “rarely went to court to seek public denunciation of and punishment for misconduct” while the Australian Prudential Regulation Authority “never went to court”.
“Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn-out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct,” Hayne said.
ABC News added the following:
In the executive summary of the report, Commissioner Kenneth Hayne noted that the commission had exposed conduct by financial services firms that had attracted public condemnation.
“Too often, the [cause] seems to be greed — the pursuit of short-term profit at the expense of basic standards of honesty,” he wrote.
“How else is charging continuing advice fees to the dead to be explained?”
Commissioner Hayne observed that from the executive suite to the front line, staff performance was measured and rewarded based on profit and sales.
“Selling became their focus of attention. Too often it became the sole focus of attention,” he noted.
“Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’.”
However, the commissioner does not sheet home blame solely to the financial institutions, with the [so-called] regulators also failing to check [the banks’] greed.
Like me, however, you may be curious about how a building or an institution like a bank can be motivated by a human emotion like greed, or make moral choices like putting profits before people, or policy decisions to reward employees for selling dodgy financial “products”.
You might think there must be some human beings in the upper levels of management making these decisions . . . and you might go on to wonder why these people can’t be identified and called to account.
Well, that was the “interim” report, so we may hope that the final result will be some serious penalties handed down to some actual bank CEOs and their enforcers. Let’s wait and see!
While waiting for news from Australia, though, there was an interesting news item from Switzerland:
How a Swiss bank was toppled by a financial scandal in Malaysia
The world’s biggest financial scandal, over missing billions from Malaysian state-run development fund 1MDB, has left the country’s former prime minister, Najib Razak, facing charges of corruption – charges which he denies. In addition to bringing down a government, the scandal’s effects have reached as far as Switzerland, where Swiss bank BSI was forced to close after over 140 years of trading.
The 1MDB fund was overseen by Najib as prime minister, financial minister, and chairman of the advisory board, and was controversial from the outset in 2009. When in 2014 it was reported that 1MDB had amassed US$11 billion in debt, posing a threat to the Malaysian ringgit, the scandal began to unravel.
Documents leaked to investigative journalist Clare Rewcastle Brown’s website Sarawak Report in 2015 revealed how money appeared to have been funnelled out of the fund via a close friend of the prime minister, Malaysian tycoon Jho Low. He has denied any wrongdoing, but is currently facing an Interpol warrant for his arrest*.The Wall Street Journal then published serious allegations of financial fraud, including the transfer of US$681m into Najib’s personal account. Funds were alleged to have been siphoned off through a web of shell companies and bank accounts and lavishly spent on items including a luxury property, a private yacht, and even funding for a Hollywood film. Investigations into these and other activities continue; Najib and Low deny any wrongdoing.
*I hope there’s no connection to the disappearance of Interpol President Meng Hongwei – we don’t want to take conspiracy theories too far.
Anyway, it’s good to see some accountability in Switzerland for the banking mafiosi – though it would have been nice to know that the CEO and the owners were going to serve some prison time rather than just closing down the bank and probably starting a new one.
As for mega-rich listers’ accountability in the United States, I saw that Elon Musk had been fined $20 million over a securities fraud, where he “misled investors when he tweeted on August 7 that he had ‘funding secured’ to privatize the electric automaker at $420 a share, causing a brief spike in Tesla’s share price.” Musk was also require3d to stand down as Board Chairman of the Tesla Company.
Sounds like a pretty serious punishment, until you realise that Musk’s net worth is currently estimated at $20.6 billion. That $0.6 on the end actually means $600 million! So the $20 million fine won’t even scratch the surface of that, never mind the other $20 BILLION! And the guy will still continue as Tesla’s CEO, so we can safely assume that his future earning capacity won’t be seriously affected.
That’s justice for you.