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Does too big to fail mean too big to change?

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By Lachlan Maddock
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3 minute read

Both the robbers and the cops who failed to catch them have gone mostly unpunished since the bloody baptism of the royal commission.

In the years since the royal commission, we’ve been told that everything has changed. There are new people running Australia’s biggest financial institutions. The regulators have also sworn they’ll do better after being exposed as overeager to collaborate with the very institutions they should be chasing. 

But what if nothing had really changed?

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The banks have launched several cultural programs with hilariously Orwellian titles – like Westpac’s catchy Customer Outcomes and Risk Excellence (CORE) – but in the wake of COVID-19 it’s clear they’re no longer feeling the heat. The Prime Minister recently thanked CBA’s Matt Comyn by name during an address at the National Press Club recently, but documents seen by InvestorDaily would suggest that the sales-based culture of the big banks has continued to fester. 

That’s without going into the commission’s worst offender. AMP somehow recently got the big tick of approval from an independent body that found that – despite 24 people being terminated for serious misconduct breaches in 2020, and 46 needing “remuneration and management action” – there’s no “systemic issues” with its culture. 

Meanwhile, APRA’s policy of working behind the scenes has led to a whopping one (1) enforcement related to the sole purpose test in 30 years and a puzzling lack of action in relation to high-profile train wrecks like Westpac’s AUSTRAC scandal (sorry – we forgot the enforceable undertaking. Westpac is doubtless quaking in its boots). A regulator who continually insists that the industry it regulates does not need regulation. How novel! The use of “non-formal approaches” is official policy, by the way. Do they start before or after the entrées? 

ASIC at least presumes the profit-driven entities it regulates might occasionally do the wrong thing, intentionally or otherwise, though that idea is likely to generate a lot of faux outrage from the Canberra crowd that has so far avoided implementing most of the royal commission’s recommendations. 

The royal commission was an opportunity for the government of the day to kick the can down the road. Its primary casualties have been financial advisers, many of whom are not associated with the wealth management divisions of the big banks that committed most of the serious wrongdoing but who have become the target of the heavy-handed regulation intended to correct it. The big banks themselves have been allowed to substitute lofty promises for real action, and continue to remediate their customers at the speed of continental drift. 

Australian Banking Association (ABA) chief Anna Bligh once said that “sunlight is a powerful disinfectant”, as though the mere act of exposing wrongdoing is enough to correct it. That may yet prove true, if the big four’s new figureheads truly are committed to righting wrongs. But two years on from the excoriating experience of the royal commission, it seems that little has truly changed.

Does too big to fail mean too big to change?

Both the robbers and the cops who failed to catch them have gone mostly unpunished since the bloody baptism of the royal commission.

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