By Joe Montero
Australia’s major banks are having a rough ride, not in terms of the profit they are making, but in the way they are seen to operate.
Never has the image of banks been so low, regarded by the average Australian as greedy, overcharging, providing poor quality, making too much money and enablers of corporate the tax dodging industry. This is the reason why proposals for an inquiry are so popular.
Evidence shows that the banks are getting extremely worried about this public perception of them. They have spent almost $7 million in a year trying to fix their image and ward off pressure for an inquiry. The public relations campaign has been a spectacular failure and this is adding considerably to the worry.
The problem is that there is substance to the accusations and no amount of soft sell is going to change this. Only change will.
So serious is the feeling against the banks that politicians are compelled to publicly distance themselves. This is part of what is behind the the $6.2 billion tax on the banks in the May budget, even if it going to be paid by the customers. at heart, the government remains sympathetic to the banks and is working hard to combat pressure in parliament for a Royal Commission. It must also cover itself politically, using diversion and pretending it too is concerned about the excesses of the banks, to respond to a deep sense of betrayal, by the government’s failure to date to take any significant action.
It is even talking about imposing more regulation and accountability measures.
Leaked documents, which include agenda papers from several Australian Bankers Association meetings and a new battle plan drawn up in April, by the Australian Bankers Association’s (ABA) public relations consultants, Newgate, highlight an acute awareness inside the sector about its image problem and frustration at being unable to combat it.
An ABA council agenda warned in December that there were two scenarios the industry faced in the “coming months and years”.
The first was “death by a thousand cuts from the current government, which has made it clear that, so long as banks remain a political issue, it will continue to make new announcements against the banks, including imposing new regulations and making further demands for banks to fund government initiatives”.
This refers to the extra powers and resources granted to the regulators in 2016 for which the banks were made to pay.
The second scenario was “a royal commission initiated by a Labor government”.
“The ABA’s assessment is that there is an 80 per cent chance of a royal commission into the industry in the next two to three years,” the ABA agenda says.
“The two scenarios are not mutually exclusive and both could play out.”
It says the banking industry’s political problems were being “compounded by a growing reaction in Australia against big business and those seen to profit from a political and economic system that many Australians feel does not benefit them.”
The papers detail that the ABA had already spent $2.6 million on a six-point plan launched in April 2016 designed to protect consumer interests, increase transparency and accountability, and build trust and confidence in banks.
The December agenda confirms a six-point plan to convince Australians that the banks were taking measures to protect consumer interests, increase transparency and accountability and build public trust and confidence in the banks had fizzled.
So, it was decided in January 2017 to add another three measures and then launch a Better Banking campaign, which, at the cost of a further $3 million, aimed to “educate key stakeholders about industry-led initiatives to deliver better products, services and culture with the banks”.
In April this year the ABA spent another $1.25 million for Newgate to develop a 14-point plan, which was to guide the new ABA chief executive, the former Queensland Labor premier Anna Bligh.
Despite the new measures, Newgate warned that “there is a lot of evidence that political momentum will continue to build against the industry” and for significant remedial action following the conclusion of “numerous parliamentary committees “. The banks have been told to expect hardening political rhetoric against them.
The ABA has also commissioned former ASIC executive general manager Phil Khoury to conduct a review of the Code of Banking Practice, which sets standards of good conduct for banks, and commissioned former Public Service commissioner Stephen Sedgwick, to conduct a review of commissions and payments made to bank staff and third parties. They have also appointed customer advocates to help when things go wrong.
They are worried and have good reason to be. Australia will continue to demand action to clean up the operations of the banks until it becomes a reality.