Australia’s scandal-plagued banks were accused of putting profits before people and of failing to meet “basic standards of honesty” on Friday, as an official inquiry offered a damning assessment of the sector.
The nearly 1,000 page Royal Commission interim report painted a picture of a sector defined by greed, forgiving of misconduct and frequently flirting with illegality.
Banks, insurers and other financial houses put “the pursuit of short-term profit at the expense of basic standards of honesty” the report said, after almost a year spent considering 10,000 submissions and hearing from more than 100 witnesses.
Asking why this happened, the report concludes that: “Too often, the answer seems to be greed.” It goes on to detail examples of cash-stuffed envelopes being taken to pass dubious loans and fees being charged to customers who had died up to a decade before.
The Australian Banking Association said the text “deserves a thoughtful considered response,” but expressed contrition.
“Make no mistake, today is a day of shame for Australia’s banks,” said the lobby group’s chief executive Anna Bligh.
“Having lost the trust of the Australian people, we must now do whatever it takes to earn that trust back.”
Australia’s financial giants — such as Commonwealth Bank, NAB, ANZ and Westpac — are among the world’s most profitable financial institutions.
They have largely avoided the shackles placed on US and European banks in the wake of the global financial crisis, which Australia sailed through largely unscathed.
Watching the watchdogs
The commission also accused government regulators of being asleep at the wheel.
“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done,” the report read.
“Much more often than not, when misconduct was revealed, little happened beyond apology,” it said.
The interim report did not make recommendations about potential regulatory changes, but focused on the need for a shift away from a culture that echoes the rapacity of traders in the 1980s film “Wall Street”.
The centre-right government, which had firmly opposed the creation of the commission, embraced its findings that will resonate with many Australian voters.
Australian Treasurer Josh Frydenberg described the report as a “frank and scathing” assessment of the sector.
He vowed to take steps to “restore confidence and trust” in institutions vital to Australia’s economy but stopped short of committing to new regulation or oversight.
Financial stocks on the Australian Securities Exchange traded up almost two percent shortly after the report was published and on the minister’s comments.
Many of the accusations contained in the report had already been made public and the absence of a firm move toward further regulation is likely to have buoyed bank shares.
The opposition Labor Party said if it wins a general election, expected next year, it would introduce a task force to implement sectoral reforms.