Australia’s financial system has been suffering from a “steady erosion of trust” ever since the GFC, says former APRA chairman John Laker.
Speaking at a Finsia event about ethics and integrity yesterday, former APRA chairman John Laker said Australia is in danger of being “tarred with the same brush” as financial institutions overseas.
Dr Laker, who is the chairman of the Banking and Finance Oath, noted that the Australian finance sector was one of the few worldwide to successfully negotiate the GFC.
Australia’s banking system was remarkably resilient throughout 2007, 2008 and 2009, he said.
Not only were the big banks well managed and profitable, Dr Laker said – they provided shareholders with double-digit returns on equity almost all the way through the crisis.
By comparison, financial systems elsewhere in the world suffered twin crises of solvency and legitimacy when global credit dried up throughout the GFC, he said.
However, in the past decade an ongoing series of financial advice, insider trading, insurance, lending and (most recently) money laundering scandals have seen the major Australian banks' reputations battered.
Dr Laker pointed to a recent EY survey that found only 20 per cent of Australians trust their financial institution to put their interests first.
“That was the same low level as the UK, which we all thought had a worse GFC experience,” he said.
“The call to action to rebuild trust is as strong in Australia as it has been in other countries.”
Dr Laker said he is trying to convince financial institutions to encourage their staff to take the Banking and Finance Oath.
“Signing the oath doesn't make somebody ethical. And not signing it doesn't [say] they aren't ethical. It's aspirational,” he said.
“In a sense it's a pity that we have to have an oath. But that's the world Australia is now in. You can't stay aloof from what's happening offshore.
“We are being tainted by that loss in confidence in financial institutions.”
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