"CBA: We put profit ahead of people", was the headline emblazoned on the front page of the November 20 Sydney Morning Herald.
The paper was reporting on the first day of the final round of hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, in which the CEOs of the Big Four banks were being grilled about the banking scandals that have outraged the Australian community over the past year.
"Commonwealth Bank chief executive Matt Comyn has admitted to a broken culture at the bank that saw it repeatedly prioritise profits over the interests of customers. This included charging inflated mortgage broking commissions and unjustified fees and selling dud insurance to tens of thousands of customers," the Herald noted.
Comyn admitted under questioning from commission lead counsel Rowena Orr that the CBA had "not consistently prioritised customer interests". It had also made decisions "that have resulted in financial gain at the expense of customer interest".
In the following days, the CEOs of the other big banks were also forced to admit they have been blatantly ripping off their clients to boost profits.
While these revelations and admissions are shocking in their scope and depth, it is hard to believe that anyone should be surprised that these crimes and fraudulent actions have occurred as a matter of course.
This is what privatised banks do: it is their business model. Private banks are there to make exorbitant profits for the mega-rich owners of big capital. Any "service" to the public is secondary and mainly aimed at gaining and keeping market share.
This reality is reinforced by the results of a survey of bank staff conducted by the Finance Sector Union (FSU), released on November 12. Some 7000 responses were received from bank workers, providing insights into the key issues raised in the royal commission.
The FSU noted: "The news isn't great for bank CEOs ... Despite numerous apologies to the customers and communities they have let down, feedback from bank workers is 'nothing's really changed’.
"Although balanced scorecards have been introduced and softer language is being used, the same old culture that resulted in the need for a royal commission prevails. The changes merely mask the need to meet unrealistic sales and referral targets that are often not in the best interest of the customer."
The survey feedback provided the basis of the union's submission to the royal commission. The submission calls for "bold, progressive change to governance, culture and remuneration structures to restore trust in the sector".
Among other key proposals, the FSU submission calls for the introduction of a Financial Services Code, which would "establish a standards framework for financial services workers" and "prohibit or substantially limit variable pay" in the industry.
The FSU also recommended the introduction of sector-wide bargaining between union and employers.
In addition to such vital reforms, the banking royal commission should recommend a drastic restructure of the financial services industry, including: mandatory separation of financial advice from banking services; increased powers, resources and genuine independence for the financial regulators, Australian Securities and Investments Commission and Australian Prudential Regulatory Commission; the possible breaking up of the big banks; and strong penalties and legal action against banks, executives and managers found guilty of fraud and financial mismanagement.
However, such reform measures, while an essential first step, should merely be the launching pad for a thorough revolution in the banking and financial sector, which would mean the eventual transformation of the private financial system into a publicly owned and managed one.
The Australian banking and financial system is in deep crisis. The banking royal commission has revealed a deep culture of "dishonesty and greed" in the sector. It has heard evidence of appalling behaviour by the major banks and financial planners in the past decade, including allegations of bribery, forged documents, repeated failure to verify customers’ financial positions before lending money and selling insurance to people who could never claim on it.
Behind these crimes lie decades of neoliberal corporatisation and deregulation of the banking and financial sector by Labor and Coalition governments. The privatisation of the government-owned CBA in 1991 was an unmitigated disaster, not only because the public lost so badly on the deal financially, but because it opened the way for the Big Four-dominated private banking oligopoly of today.
Moreover, a public bank — under democratic management — could be used to avoid the crimes and malpractices that are so widespread today. It could be the springboard to extend the public banking sector to cover the whole of the Big Four.
We need a major national campaign to take back the wealth that has been stolen from us over decades. A nationalised banking system could provide a huge funding base to revive the ailing public sector, including for spending on public health, education, transport, housing and sustainable energy.
The best way to avoid any new public banking system management being corporatised and bureaucratic is by ensuring that control is firmly in the hands of an elected board, representing employees and the community.
Making the banking sector democratic and transparent is our only hope of tackling the problem — the private ownership of the financial institutions that control our wealth.
[Jim McIlroy is a Socialist Alliance national executive member and author of Nationalise the banks: Public control needed to end rip-offs, which is available from Resistance Books.]