What $28 million men couldn’t answer

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The latest this week out of Parliament is the the big four banks inquires. Malcolm Farr gives an overview and what’s next.

The Big Four.

SOME $28 million-a-year worth of prime banking CEO moved through Parliament House this week and voters now have to decide whether they are better off for the visits.

The figure is roughly the combined annual base salaries — before bumper bonuses usually linked to share price performance and profitability — of the Big Four chief executives.

They faced 10 MPs — total salaries about $2 million — on the House economics standing committee.

Lots of questions were asked but the big one left hanging was: Will unhappy bank customers think their concerns have been answered?

This is the big one that will have to be addressed in the committee’s report to Parliament. Almost certainly it will not be a bipartisan report.

The hearings were the first of what Prime Minister Malcolm Turnbull said would be an annual engagement when he rejected Labor’s call for a royal commission into the finance sector.

Labor says the three days of hearings, which ended today, showed a bigger inquiry was needed, and that a couple of QCs with plenty of time and resources would be more effective than a small group of MPs.

The Government MPs have asked about the possibility of a banking industry tribunal, possibly as a further option short of a major inquiry.

The differing tactics and priorities of the six Coalition committee members and the three Labor MPs — with the Greens Adam Band on paternity leave but listening in on the phone — were stark.

Labor wanted to put on the committee record an extensive list of bad behaviour by banks, in the hope the accumulation of misdeeds would heighten demands for a bigger inquiry.

For example, the Commonwealth Bank team had to sit through a Labor re-run of a jarring episode when a CommInsure assessor declared a death a suicide — with no payout — when police and the coroner ruled it accidental.

This was followed by bank chief Ian Narev telling Labor’s Pat Conroy no one had lost their job for this or other unwanted practices.

The Government MPs focused on broader issues, including measures to boost competition among banks.

The LNP’s Scott Buchholz told the first hearing most of his constituents wanted accountability on why credit card interest rates were so high — up to 20 per cent on cash advances on the lowest-level cards — when official rates were so low.

All banks make a motza on their credit card operations and often train tellers to push customers to sign up for them. It is doubtful many on the committee were happy with explanations.

Liberal MP Craig Kelly was persistent on the margin applied to small business loans.

He also raised the prospect of a banking tribunal to handle complaints which would be too expensive for small business operators to take to court.

“isn’t that because the legal system we have at the moment currently isn’t working, that a consumer or a small business that has experienced wrong-doing by a bank simply can’t go through the existing court process?” he asked the NAB’s Andrew Thornburn.

The CEO replied his bank wanted to make it easier to deal with complaints, but argued there had been a 64 per cent fall in complaints going to the financial ombudsman.

Westpac’s Brian Hartzer told the committee the bank was receiving three times more compliments than complaints.

All CEOs said they were improving ethical standards when they spent three hours before the committee, with varying responses to requests for further appearances or information.

The Commonwealth Bank’s Ian Narev declined to volunteer information on credit cards but the ANZ’s Shayne Elliott said it would be provided.

Committee deputy chair, Labor’s Matt Thistlethwaite told Sky News the executives hadn’t been as open as he wanted, “certainly not as open as (at) a royal commission”.

“There are a lot of questions that have been taken on notice; where they can’t provide answers they’ve claimed commercial-in-confidence,” he said.

The exchanges were not always productive.

Today committee chairman and Liberal MP David Coleman interrupted the NAB’s Andrew Thornburn to say: “I’ve asked you three (times)… and you haven’t answered the question.”

One of those broader issues was why banks took so long to implement interest rate cuts but moved swiftly to increase them after official rate movements.

Whatever the banks say, one observer, economics professor Abbas Valadkhani of Swinburne University of Technology, writing in theconversation.com, has a view and it’s all about close to $9 million a day banks save and borrowers are denied. .

“According to my analysis, the big four banks can make approximately $8.6 million per day as a group if they do not fully pass onto borrowers a hypothetical 0.25% cut in the RBA’s cash rate,” he wrote.

“More specifically, if ANZ, CBA, NAB and Westpac manage to postpone lowering their mortgage interest rates say by 10 days, they can potentially make an extra $16, $28, $16 and $26 million dollars in profits, respectively.”

These hearings won’t change much unless there are follow-up engagements or at least additional information provided by the banks.

The committee’s strength will be tested on this. It will have to get some concessions from the CEOs or have little defence against the “wet lettuce” jibe.

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