In approximately 3 weeks ( NB- was originally written in Aug 2012 – still yet to make the floor) , a Private Members bill, submitted by Independent MP-Andrew Wilkie, will be presented to the Parliament.
The bill, known as the Banking Amendment (Banking Code of Conduct) Bill, requests the Australian Government to make it mandatory for all banks conducting business in Australia to adhere to a set of rules governing their behaviour towards individuals and small businesses, with breaches of this new code allowing APRA to name and shame the banks publically, and sanctioning fines for grievous or continuous breaches of the code.
That would mean there is a current code.
So, what’s wrong with the current code, and why would we need to change it?
Glad you asked.
Because if you have a bank account with a bank in Australia, if affects you.
If you have a credit card, car loan, home loan, overdraft with a bank in Australia, if affects you.
If you are a small business in Australia, it affects you.
It goes a little something like this:
The 1980’s – Systematic de-regulation of the Australian Banking industry. Recession.
1991 – A report, known as the Martin Report, was submitted to Parliament. This report was an investigation into the behaviour of banks, specifically, establishing a formal system of self-regulation, based on a government approved set of codes. It further raised the issue of the high-costs associated when there was a legal dispute between a customer and a bank, as customers were forced to fight them in the courts. Banks, as we have all seen, have an amazing amount of money, and legal expertise at their fingers. Individuals, small businesses, including farmers, do not. The playing field here was more like a black run in the ski-fields of Switzerland, than the level cricket pitch it is meant to be.
Thus, one of the recommendations laid down in the Martin Report, was to correct this, and allow any and all complaints to go through an independent body where a fair investigation would be conducted and decisions could be made without forcing people to go through the costly legal system.
However, instead of the Government taking this on board, and making it mandatory, the banks turned around and said “ Hey – fair enough, but we’ve got this. You don’t need to oversee it. We’ll make sure this happens”.
And so they did. They came up with a list of behaviours to adhere to, with hardly any of these codes aligning with the recommendations of the Martin Report, and they called it the “Banking Code of Practise (1993)” It took 2 years for it to be written, and another 3 years for the code to be adopted in 1998 and even then, it was a voluntary code, which APRA didn’t have to monitor (only have to regulate mandatory codes).
To date, 16 banks have signed up to it, each of them adopting only the parts of the code they wished to.
These early terms were very simple.
a) The banks would adhere to the terms within the code and
b) ANY and ALL complaints would be investigated.
In May 2000, The Australian Banking Association (ABA) appointed Richard Viney, to conduct a review of the code with industry, government and consumer advocacy groups. This happened at the same time the Minister of Financial Service and Regulation, Joe Hockey, was pushing for an increased level of “self-regulation” to occur within the Financial Industry.
The updated recommendations submitted were that small businesses would now be protected under the code, a Principle of Fairness charter would be added (requiring banks to deal “fair and reasonably towards [you] in a consistent and ethical manner”), and that a new, separate and independent Monitoring Committee should be established to investigate any breaches of the code. This group, created in 2004, was/is known as the “Code Compliance Monitoring Committee”, or CCMC, and was/is selected by, appointed by and funded by the very banks themselves.
This however, prompted the banks to reconsider the terms and wording of the entire Code, and in 2003, Gail Kelly (then STG CEO) and John McFarlane (ANZ CEO) presented the updated “Banking Code of Banking Practise (2003)”. The loopholes snuck into this new code of 2003, were such, that no longer would the CCMC be available to investigate any and all complaints, but that they were restricted to levels unimaginable.
This is because, shortly after the terms of the Code were changed, a secondary contract was put in place, by a group known as the Code Compliance Monitoring Committee Association, or CCMCA.
And the people within the CCMCA are who? Well, no-one knows for sure, because it is an “undisclosed” body, however it has been said to be a cartel, containing only Bank CEO’s. This contract, or “Constitution” was placed over the behaviour and operational activity of the Compliance Monitors.
The systematic gutting on the rules surrounding the terms of investigation have been so successful for the banks, that since 2003, approximately 2.5 million complaints have been lodged, with about 250 actually being investigated by the CCMC to have breached the code.
To give you an example, 2.5 million complaints to 250 investigations looks like this.
( You might need a magnifying glass..)
Did the banks know what they were doing when they changed the Code wording, inserted their own terms upon their funded and appointed “independent” monitoring committee to monitor the very people, who were telling them what they could monitor in the first place?
This goes further than the often cited phrase of “Police investigating Police.” This is more like a Police officer charged with a crime investigating himself, based upon his own decision as to what he’s allowed to investigate, and what constitutes as “evidence”!
The bill being put forward will end the CCMC’s reign as we know it, requiring all code breach complaints to be investigated by APRA, a government body, already set up to regulate the banking sector.
It’s not perfect, but it’s a damn sight better than having only 3 people nationwide (who are appointed by the Banks), responsible for the investigation of all consumer bank complaints. It would not only penalise the banks, both financially and legislatively, and allow APRA to name and shame, but it would provide a level of transparency not seen before in the Australian Banking System.
When Andrew Wilkie announced his bill in August this year, it took only milliseconds for the ABA to reject his suggestions that the current Banking Code of Practise and the CCMC were “toothless tigers”, and that the Banks believe the current format was fair and equitable.
The ABA also suggested that “additional layers of regulation..make it more risky and expensive to lend to small business.”
More expensive? More risky? Perhaps, but “expensive and risky” has been in the lap of the consumer for far too long due to the lack of independence and the forcing of complainants having to go through the legal system, against the banks’ army of lawyers, to get any sort of justice.
The cash rate of the Reserve Bank has been slashed constantly over the past year, allowing the borrowing costs of banks to actually go down, especially when the full rate cut is failed to be passed on. By not passing on the most recent rate cut in October 2012, the banks are making an additional $6.2million per day. This is at a time where record profits have reached $24billion between the big four in 2010-2011.
More expensive? I believe they can afford it.
You could say that the extra $6.2million per day that they are making off us, is currently being spent on the army of lawyers who are needed to fight struggling small businesses, farmers and individuals in the courts. And of course, on a constant barrage of wonderful, if not misleading and deceptive, PR and marketing initiatives.
The current state of affairs deserves no less than a Royal Commission into the corrupt, misleading and deceptive behaviour and intrusion of the banks CEO’s into a supposed Independent complaints procedure, designed to protect the majority of Australian citizens.
I am therefore asking everyone associated with Occupy around Australia, the advocacy groups, the consumer protection groups, to contact their local MP/Media outlet, to give this bill oxygen and media coverage, so that the banks can finally be held accountable for their ongoing mistreatment of the Australian public.
Ph: 0416 088 981
Senate enquiry S90 – Competition in Banking – Dec 2010