February 23rd 2019


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Articles from this issue:

COVER STORY Something rotten led to fish-kill: perhaps fishy environmentalism

EDITORIAL Resistance grows to Beijing's soft-power push

CANBERRA OBSERVED Climate change: deadly ... to political leaders

TECHNOLOGY Electric cars: UK taxpayers subsidise rich greenies

BANKING ROYAL COMMISSION A step too small?

CYBER SECURITY Chinese smartphone threat extends way beyond Huawei

SOCIETY Such grandeur of spirit

POLITICS John Hewson should have as sturdy a Constitution

FINANCE Hayne royal commission sets agenda for bank reform

FAMILY RELATIONS Dad: a girl's first and most influential love

COMMENTARY Words gone feral: rights and equality

MEDICINE AND CULTURE Book captures tragedy of falling foul of a fanatic

SOCIETY AND CULTURE A dog's life: reflections of a grey nomad

HUMOUR

MUSIC Serialism a killer: Ideas tend to get in the way

CINEMA Cold Pursuit: Revenge served up manic

BOOK REVIEW Why the West and nowhere else

BOOK REVIEW The escalation of horror and atrocity

LETTERS

FAMILY AND SOCIETY The end of Liberalism

SPECIAL EDITORIAL Has Cardinal George Pell been wrongly convicted?

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BANKING ROYAL COMMISSION
A step too small?


by Dr Mark McGovern

News Weekly, February 23, 2019

Many had been hoping for substantial changes to the financial system after the extensive misconduct so publicly revealed in the last year. Instead, in the Final Report of the Financial Services Royal Commission, we have a string of modest recommendations, largely dealing with technicalities or chosen specifics.

This is most surprising, since the Australian financial system has incubated an extreme and historically unprecedented level of debts, too often without establishing serviceability. For example, rural enterprise and urban household debt totals have grown much faster than have servicing incomes. Yet, “sprucing up” is recommended, just as (more) very heavy weather threatens!

The Final Report begins strongly, with comments like: “Everything that is said in this Report is to be understood in the light of that one undeniable fact: it is those who engaged in misconduct who are responsible for what they did and for the consequences that followed.” (p4)

So, will “responsible” parties be held accountable? It seems not, even after clear evidence of serious misconduct, sometimes for a decade and more. “Misconduct” typically involves a breach of ethics, and sometimes of the law.

Using misconduct in public office in Queensland as an example (Queensland Criminal Code 1899, 92A) the situation is clear:

“A public officer who, with intent to dishonestly gain a benefit for the officer or another person or to dishonestly cause a detriment to another person:

“(a) deals with information gained because of office; or (b) performs or fails to perform a function of office; or (c) without limiting paragraphs (a) and (b), does an act or makes an omission in abuse of the authority of office; is guilty of a crime.”

So, why is “misconduct in financial office” seen as different? As Commissioner Kenneth Hayne writes in the report:

“It seemed to me that some sought to deflect attention away from whether the conduct was dishonest. There began to emerge a narrative, reflected even in the evidence of Mr Wayne Byres, chair of the Australian Prudential Regulation Authority (APRA), that fees for no service was all just a series of careless mistakes capable of being swept aside as ‘processing errors’.” (p138)

Ethics barely rates a mention. “Justice” appears but once, as in “access to…” (p490). Law alone is the solution it seems: “A breach of the code of ethics must not be allowed to obscure, or be treated as more significant than, a breach of the law” (p211). So, Ethics fits within a Code, and appears limited by It.

One of the main priorities of incoming interim NAB chief executive Phil Chronican, while running the Australian business at ANZ, was “instilling ethics into banking and finance” (The Australian Financial Review, February 7, 2019)

From where might Chronican draw inspiration? “Ethical banking” appears online as involving “we don’t lend to bad guys” claims. “Moral banking” offers more interesting insights such as these three:

“Banks must assert the moral worth of their core business activities – the achievement of their customers’ financial goals. They must articulate this purpose in the form of accessible stories and not economic jargon. If they don’t learn to do this, then they will steadily lose moral authority to social activists and their many critics.” (Tanveer Ahmed, a practising psychiatrist, “Banks are in a moral business – and they should say so”, AFR, February 19, 2018)

“A second preliminary conclusion is that the value of fairness has been eroded among bankers. In the Australian Interviews 6, 7 and 9, the top-level bankers state that they would continue to lend and offer banking facilities to legitimate businesses so long as regulations do not prohibit doing so. In other words, there is a reluctance to avow any values and therefore a passive surrender of this responsibility to the state.” (Jes Villa, a practising financier and lecturer, in Ethics in Banking: The Role of Moral Values and Judgements in Finance)

“One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person!

“Behind this attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person.” (Francis, a practising pontiff)

So, how are bank, agent and customer to relate? And who should take responsibility when things go wrong? Often today the customer is, “under the contract”, assumed responsible for anything that goes wrong, even when strong influences beyond customer or banker control are involved.

The report makes some welcome recommendations, but serious limitations are evident. Much work remains to be done if the financial system is again to contribute sustainably to the prosperity of the Australian people.

Dr Mark McGovern is Visiting Fellow in Economics and Finance at the Queensland University of Technology.




























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