Editorial: Bank-bashing can’t be free-for-all

31-Aug-2017

By Darin Tyson-Chan

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It seems the news just goes from bad to worse for Commonwealth Bank of Australia (CBA). In recent times, Australia’s biggest bank has had problems with its financial planning and insurance arms and the latest scandal has revealed a dereliction in its duty to comply with the anti-money laundering and anti-terrorism requirements for financial institutions in this country.

Naturally you can’t have all of these scandals occur without there being some sort of accountability for them and so the logical person to take responsibility was CBA chief executive Ian Narev, who announced his “retirement” before the end of the 2018 financial year.

And it has now been revealed the Australian Prudential Regulation Authority (APRA) will conduct an independent inquiry into the bank’s governance, culture and accountability.

With such a succession of disastrous events, I think most people would think an APRA inquiry would be appropriate even if they didn’t support a full-blown royal commission into the banking sector as a whole, as has been suggested in recent times.

But when making organisations accountable for their actions that have adversely affected customers, care needs to be taken not to go too far in punishing institutions that have done the wrong thing.

A case in point is the class action law firm Maurice Blackburn is taking against CBA, funded by IMF Bentham, on behalf of the bank’s shareholders due to the drop in value of their holdings when the anti-money laundering scandal was revealed.

The action is looking to recover $7.8 billion that manifested as a result of a $4.58 drop in the CBA share price when news of the latest scandal broke.

Now this move might garner a lot of support from the public due to the number of Australians holding CBA equities, estimated at around 800,000. But exactly how does this loss translate in reality?

In order for any CBA shareholder to have suffered an actual loss from this event, the loss would have had to be realised – that means they would have had to have sold all, or at least a portion, of their holding at the point when the price drop was at its most severe before any bounceback.

Do any of us honestly believe this could have been the case? Is it possible any of the large superannuation funds panicked and sold their CBA positions when they found out the bank had breached the anti-money laundering laws? I’d hazard a guess not.

In addition, if the class action were to get up, and the bank had to fork out the required $7.8 billion, who would actually be punished? Surely it would be the remaining shareholders, as no doubt there would be a further drop in the CBA share price once news of the compensation package awarded was reported.

It’s one thing to ask the CBA to compensate customers who have lost money from its wrongdoing because consumers are not necessarily invested in the bank in another capacity.

In the end what does all of this achieve? Nothing more than a demonstration that we can’t just implement any punitive measures we might think of on organisations that have done wrong by the public.

Accountability measures need to be considered and commensurate with the crime. They also need to be clear in their objectives and not just represent another opportunity for lawyers to gouge money out of the said institutions.

Organisations such as the CBA and its management need to be held responsible for unsavoury and illegal behaviour, but bashing them again for the sake of it does not achieve this purpose.

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