Achi news desk-
If you can count on one thing with Australia’s banking oligopoly, it’s that they will insist on being allowed to do riskier lending despite having to be repeatedly bailed out from the consequences of such lending, knowing that taxpayers will never let them fail. They even tried that stunt on Wayne Swan as the financial crisis began to wreak havoc across the world 15 years ago, and now they’re at it again.
Having used the Reserve Bank’s punitive interest rate hikes to fatten themselves over the past 18 months, the big four banks are hoping politicians and voters will forget what happened the last time they were allowed to do what they wanted – which led to scandal after scandal, a royal commission and billions in damages for disgraces such as charging dead people and fees for no service.
Of course, the latest push for less lending regulation by the likes of the Commonwealth’s Matt Comyn and outgoing NAB chief Ross McEwan is being dressed up as being in the interests of consumers and the wider economy — not banks . All the big four want is to stop people being forced into the clutches of payday lenders and other unsavory types. “The pendulum has swung too far on banking regulation”, says McEwan — applauded, naturally, by the business press.
A generous interpretation of the latest demand for banks to engage in riskier lending is that they have forgotten about the federal government and the Reserve Bank bailing them out during the financial crisis, with guarantees for debts for three years and on deposits up to $250,000 permanently. , and again during the pandemic when the RBA came to their aid with a term funding facility. The second time came just a year after the true exploitative nature of the banks was revealed by the Hayne banking and financial services royal commission.
But the real story about the call for more risk and less regulation isn’t about the freedom to lend money to customers and be innovative—it’s about setting the stage for weak returns and revenue growth over the next year or two. While tightening monetary policy, the Reserve Bank boosted bank revenues through higher variable rates on home loan mortgages while failing to increase lending rates for customers by the same amount. The old adage is that bank loan costs are faster to rise and slower to fall, while deposit rates are slow to rise and fall fast – AKA the great net interest margin. It’s great for bank profits, as recent results have shown—and the bonuses of CEOs and bank executives.
But now that stimulus has all but dried up with the RBA poised to leave rates where they are for much of this year. Deprived of their source of easy profit growth, the banks are looking for alternatives. They want to cut branch costs but they face political opposition to closing branches, particularly in regional areas and the outer suburbs of the big cities. They are also trying to end the use of cash, encouraging the use of online banking (which comes with increased fraud risks and cyber security costs) and contactless payments.
The alternative: scrapping the regulations that have delivered an “undoubtedly strong” banking system since the Murray inquiry a decade ago.
For good measure, the bank CEOs are delivering some free reform advice, led by CBA’s Comyn, who was happy this week to lecture us on “international competitiveness, dynamism and supporting the mobility of labor and capital” . Comyn wants income tax for people earning up to $300,000 to be cut to 30%, the GST increased and tech giants (who are payment competitors with the banks) hit with a levy.
Gotta admire the obsession of the big business lobby with a punitive increase in the GST while the rich enjoy a tax break.
But Westpac’s Peter King, backed by Comyn, had more reform advice: there are too many elections and we need fewer of them so we can have reform and “certainty” for business. That’s right—what you might think of as democracy is really just risk and uncertainty for big business that many worry about, and we need less of it. As we’ve noted before, big business is suddenly enamored with four-year terms because they think reforms that voters hate are more likely to succeed if they can’t vote as often.
Of course the banks want less democracy. Democracy is the reason why they were humiliated en masse at the banking royal commission, which was the result of relentless political pressure on then prime minister Malcolm Turnbull and his treasurer Scott Morrison to do something about scandalous misconduct the banks. No wonder the big banks want to take voters out of the picture.
