Bank Ethics (and trust).

I feel that I may (repeat may) possibly have had a small influence in the Australian Banks decision to "allow" a Banking Royal Commission - I'm not boasting mind!! Some weeks ago I wrote to the Australian Bankers Association and I offer this contribution for those interested to read:-

The Chief Executive Officer

Australian Bankers' Association
Level 3, 56 Pitt Street,
Sydney. NSW 2000

Dear Ms Bligh,

Re: Bank Ethics (and trust).

I am sure I need not remind you that it is obvious, not just to me, that the lack of ethics and morals evidenced by banks in Australia needs to be addressed. Banks, ALL banks, direct their activities at preserving and protecting shareholders, their “market position”, their liquidity and their profitability, with SERVICE and the poor old CUSTOMER way down the list of priorities.

We have had, in the recent past, the terrible social effects of the blatant greed and moral shortcomings evidenced by Wall Street banks in 2007-2008, (the GFC); we have had the LIBOR scandal in London; we have seen many billions of dollars in penalties paid by banks world-wide for aiding and abetting questionable financial transactions - now it is the Australian banks falling foul of the regulators, the public and politicians.

So far all four of Australia’s biggest banks have allegedly been guilty of breaching laws and regulations set by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). The banks have been variously accused of defrauding customers through questionable investment advice and dodgy insurance cover, rigging the Inter Bank Rate, lacking moral judgment and generally being unethical in their dealing with their customers money.

I will reiterate what I have said before, many times, that without customers (people) there would be no money, no need for banks and therefore by default, no need for shareholders. Money is not “self-emergent” – it is a human construct.

Pursuing the logic of this it would appear to be a “no brainer” that customers (i.e. people), are the vital part of the banking system, not just in Australia but world-wide. It should be a simple case of “look after the customer” first and foremost, legally, ethically and with moral undertaking. Do this and the money will look after itself. And what is of utmost importance, trust in the banking system would be restored and banks would no longer invite opprobrium and be considered “bastards”.

This will require a cultural shift  - the “fiduciary culture” - by all concerned, starting with the boards of directors, chief executive officers and managers. Until all these people conduct themselves with ethical and moral underpinnings nothing will change.

Unfortunately, for all concerned, until there are changes, banks will continue to be mistrusted and reviled.

I will be very interested in any response you may offer.

Yours sincerely

Andrew Campbell-Watt

No matter what – banks are still bastards!

It is not just me complaining about the lack of ethics and morals evidenced by banks in Australia. Australian politicians are now supporting what I have been saying for a long time, and it is unfortunately all too true. Banks, ALL banks, direct their activities at preserving and protecting shareholders, their “market position”, their liquidity and their profitability, with SERVICE and the poor old CUSTOMER way down the list of priorities.

We have had, in the recent past, the terrible social effects of the blatant greed evidenced by Wall Street banks in 2007-2008; we have had the LIBOR scandal in London; we have seen many billions of dollars in penalties paid by banks world wide for aiding and abetting questionable  activities and money transfers - now it is the Australian banks falling foul of the regulators.

So far all four of Australia’s biggest banks, the Commonwealth Bank of Australia (CBA), the Australia and New Zealand Bank (ANZ), National Australia Bank (NAB) and Westpac (and some of the smaller ones) have allegedly been guilty of breaching laws and regulations set by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investment Commission (ASIC). They have been variously accused of defrauding customers through questionable investment advice and dodgy insurance cover, rigging the Inter Bank Rate, lacking moral judgment and generally being unethical in their dealing with their customers money.

I will reiterate what I have said, many times before – without customers (people) there would be no money, no need for banks and therefore by default no need for shareholders.

Pursuing the logic of this it would appear to be a “no brainer” that customers – i.e. people, are the vital part of the banking system, not just in Australia but world wide. It should be a simple case of “look after the customer” first and foremost, legally, ethically and with moral undertaking. Do this and the money will look after itself. And what is of utmost importance, trust in the banking system would be restored and banks would no longer invite opprobrium and be considered “bastards”.

This will require a cultural shift  - their “fiduciary culture” - by all concerned, starting with the boards of directors, chief executive officers and managers. Until these people conduct banking with ethical and moral underpinnings nothing will change.

Unfortunately, for all concerned, until they do change and adopt customer best practice they will continue to be mistrusted.

Banks are still bastards!

Well! Well! Well! Here we go again. An Australian bank, again, accused of fraud, greed and extracting money, by any and all means possible, from unsuspecting customers. I am writing specifically about the Commonwealth Bank of Australia (CBA) – Australia’s biggest bank.

When will banks learn that their first duty (repeat first duty) is to provide the best service they can to their customers, not, (repeat not) to shareholders or other stakeholders.

Bank’s must remember at all times, and never forget, that money comes from people, their customers – individual, commercial and industrial. There is no other source of money. Money was developed by people for people to facilitate trade. Banks, as we recognise them today, did not appear until about six centuries ago, with the Venetians.

Without customers (people) there would be no money and, by default, no need for banks. It would seem very obvious to me that the primary concern of any bank should be its customers. This is called “service” – a term that has been all but forgotten.

For any bank and in particular Australia’s largest bank (the CBA), to so fail in its fiduciary duty to its customers as to stand guilty of fraud and general mismanagement of its financial investment division is almost beyond belief.

That the regulatory authorities in the guise of the Australian Investments and Securities Commission (ASIC) were so dilatory in their duty as to allow this to happen, is again, almost beyond belief.

For those who may not have followed the recent revelation about the CBA it is a fact that thousands of trusting customers have lost their life savings – hundreds of millions of dollars – through questionable advice offered by questionable bank staff  advising customers to invest in questionable financial schemes. And to top it all some records apparently have been altered, forged or lost so it is unclear as to exactly how many customers have been defrauded and  exactly how much money is involved.

That other banks are involved in similar schemes will become clearer in due course.

But the fault, in this instance, lies squarely with the bank (the CBA), its management and general culture of greed and seeking profit at all costs without any regard for the consequences. How apposite is the old saying in this case - “the biter bit”!

I reckon the old Australian term, “banks are bastards” is still very much alive and still very valid!

(Amended 24/07/2014)

Would you buy a used car from your banker?

My one loyal reader will be aware of my deep antipathy towards banks and big banks in particular. I am appalled by their lack of integrity; appalled by their total ignorance of the concept of “service” to the customer as a priority (and NOT shareholders as a first priority); appalled by the uncontrolled (and apparently uncontrollable) greed shown to be prevalent in all levels of management in all banks.

That the banking chickens have now come home to roost, as it were, in Britain, Europe and America, is a measure of the breathtaking hubris, the corruption, the dishonesty, the lack of moral compass, the disinclination to accept responsibility, a cynical interpretation of ‘trust’, the injustice and (apparent) total ignorance of the need for ethical conduct – at Board and senior management levels of all banks everywhere (including Australia). What is playing out in the financial market is indeed an astonishing example of a corrosive and toxic culture that permeates from the top down. With staff at lower levels it is a case of “follow my leader”. The end result of this has been a belief in the mantra of profits and growth at any cost; a mantra extolling the virtues of maximising bonuses and maximising returns to shareholders without any apparent thought for the consequences that would, inevitably, flow from this self-serving attitude.

That was the cause. Now for the effect. Now is the time to pay – and make no mistake there will be a massive payout; a massive cost. Not just in money (banks can always make more!) but in the damage to the brand of “Bank”.  The public have lost trust in the integrity and purpose of banks. In this context read Barclays, HSBC, CitiBank and many, many, others.

In the Australian context, and as a case in point, there is a media release by Steven Munchinberg, the former CEO of the Australian Bankers Association (not sure of the date but it is fairly recent) entitled “Think twice before bashing the banks”. Now in this article the word “profit” is mentioned many times. Share holders equity get a mention but the word “service” is mentioned only once in the second last line in the context of  “ good value services” (whatever that means). No mention of service to the customer (depositor); no mention of banks doing their very best for the customer (depositor) – providing a good “service” to the customer (depositor). Money and profits have nothing to do with service. And “service” does not just mean a bloke with a top hat and tails greeting customers at the door!!

In banking circles there appears to be no belief in, or even an understanding of the concept of ethics – that you need to treat others the way you would like to be treated. In banking circles there appears to be no understanding of the importance of trust – that sanguine belief that customers hold to, the hope that a bank (any bank) will do its very best for me (the customer). Some hope!!

Banks have forgotten that money will follow and flow from good service. Good service will NEVER flow from money!!

Without complete trust there can be no hope of any successful business outcome. So, in the words of the title of this post, “would you buy a used car from your banker”?

Think VERY carefully before you answer.