Aussies face bank robbery scourge – where the banks are the robbers
If you think our banks are bad, just wait till you've read what people have to put up with Down Under
When entrepreneur Sean Butler bought the heritage National Hotel in Fremantle, in Western Australia, he had ambitions to restore “a beautiful old hotel” to its former glory.
The upmarket four-storey building had catered to affluent punters since the region’s gold boom of the 1880s, but had since fallen into disrepair.
It was a big project, but Butler, the owner of a resort nearby and two further properties, felt prepared. What he had not factored in was his lender, Bankwest, aggressively asset stripping him and his business.
When he ran low on cash, rather than helping him through a rough patch, his bank put up his interest rates and fees to A$120,000 (R1.2m) a month and brought receivers in to seize all his properties. The charges ultimately set him back A$1.2m.
“It was terrible,” Butler says. “I had four dependent children, I was married. I’d built up my assets over my life and had a staff of 50.
“We had record profits when this happened, so there wasn’t any problem with the business, it could have continued going forward. It was devastating. I lost my house, I lost my life savings. It was beyond belief.”
Butler’s ordeal was one of numerous cases of mistreatment by Australian finance firms that grabbed headlines and ultimately forced the government to launch a royal commission into misconduct in finance last year.
No one could have predicted the extent of wrongdoing it would uncover.
In a stinging interim report published last Friday, the commission said it found a rampant culture of greed and bad behaviour. Among the misdeeds were A$1bn of fees charged for no service, systemic misselling of financial advice, insurance premiums taken from dead customers and firms lying to regulators.
Companies preyed on the vulnerable, with services mis-sold to indigenous farmers with limited financial literacy and life insurance companies spying on mentally ill policyholders.
Retired high court judge Kenneth Hayne, who led the inquiry, said firms had too often been motivated by “the pursuit of short-term profit at the expense of basic standards of honesty”.
“Today is a day of shame for Australia’s banks,” Anna Bligh, chief executive of the Australian Banking Association, admitted.
There is already talk among politicians of breaking up Australia’s banking industry – dominated by the big four players, National Australia Bank, Commonwealth Bank, ANZ and Westpac – and the major players in its wealthy superannuation pensions sector.
Adele Ferguson, an Australian journalist who helped uncover some of the scandals and is working on a book entitled Banking Bad, is dismayed the sector was allowed to get away with “institutionalised theft on a massive scale” and praises the inquiry for “helping throw sunlight on a sector allowed to grow in the dark”.
Allan Fels, a former top regulator at the Australian Competition and Consumer Commission, argues business as usual can no longer be an option: “The royal commission has exposed in dramatic fashion systemic misbehaviour that is unethical and at times unlawful. There has been totally unacceptable conduct by banks and financial institutions.”
As a former watchdog himself, he is dismayed the country’s two principal financial regulators – the Australian Securities and Investments Commission and Australian Prudential Regulation Authority – proved so weak. He criticises a “culture of non-enforcement for over 20 years” and a reluctance to take misbehaving firms to court.
Following the commission findings, an avalanche of court cases against finance firms is now expected.
“I think the government thought the commission would reveal a little bit more wrongdoing and they could increase the fines and strengthen the regulator,” he says. “But the whole thing has got out of hand.”
– © The Sunday Telegraph