“Cosy” Terms of Reference For Big Four Banks Hearings

The Treasurer has asked the committee to hold public hearings at least annually with the four major banks focusing on:

• domestic and international financial market developments as they relate to the Australian banking sector and how these are affecting Australia

• developments in prudential regulation, including capital requirements, and how these are affecting the policies of Australian banks

• the costs of funds, impacts on margins and the basis for bank pricing decisions, and

• how  individual banks and the banking industry as a whole  are responding to issues previously raised in Parliamentary and other inquiries, including through the Australian Bankers’ Association’s April 2016 six point plan to enhance consumer protections  and  in response to Government reforms and actions by regulators.

Given the aim of the appearances was to counter calls for a Royal Commission on the finance sector, they do appear very gentle. Whilst there are some culture-related issues being handled by the ABA’s internal processes, sharper question about remuneration practices, complaints as well as structural and organisational issues should be on the agenda, if the sessions are to have teeth. For example:

• How does the vertically integrated business structures, across banking, wealth and insurance, and from advice through to sales and service (both via internal and third party channels) impact consumer outcomes?
• Do commission arrangements degrade the quality of advice, product fit and price consumers receive?
• What are the root causes of the recent raft of poor practice and complaints. What is being done to address them?

The committee does include cross-party representation, but with a noticeable bias towards the current governing parties!

The voice of smaller competitors and consumers of bank services will not be heard though this process.

It all feels rather cosy!