Bank inquiry won't take royal commission off the political agenda

The initial day of the parliamentary interrogation of the big banks’ chiefs has probably only strengthened the hand of those urging a royal commission.

Malcolm Turnbull proposed bank executives should be called before the House of Representatives economics committee as a way of heading off pressure for a comprehensive inquiry, which Labor has made a signature policy and the banks desperately want to avoid.

But the banks’ appearance is just refocusing attention on the scandals they’ve had and the victims of them. In the run up to the hearings, the media have aired and re-aired stories of how people have been done down, often in heartrending circumstances, providing a personal edge for questioning.

Tuesday saw three hours of testimony from the Commonwealth Bank’s chief executive Ian Narev and its chief risk officer David Cohen, with the bosses of the other banks to follow on Wednesday and Thursday.

For disgruntled customers Narev’s message was: yes, mistakes were made, and past cases are still being worked through, which indeed will likely produce instances of “more poor customer outcomes” and compensation that’s due. “Critics will paint these as signs of ongoing problems. Actually, they’re signs of how serious we are about fairness.”

Most customers were satisfied, and the bank really did care about those who weren’t, he insisted. It now has a “customer advocacy function” to minimise the chances of customers feeling disempowered.

He’d spent time with people “we have let down”. “I’ve said before how sorry I am for the pain that we’ve caused them,” he said. “I say so again today.” He would not, however, concede a systemic culture problem, the perception of which is at the heart of demands for a royal commission.

As for the large profits, “it is correct that our returns on equity are higher than many banks in other developed markets but in most of those markets, banks have failed, nearly failed or struggled severely. Our profits are at a level that enable us to keep the confidence of global funders who play a critical role in our ability to consistently extend credit.”

And to those who believe credit card interest rates excessive, well, that’s “high risk unsecured debt” for the bank.

In having the executives appear, Turnbull acted off the back of the banks failing to pass on all of the Reserve Bank’s August reduction in the cash rate. Narev said it was a matter of balancing the interests of borrowers, depositors and shareholders. He stressed that the latter were “not Australia’s elite”. “Nearly 80% of CBA is owned directly or indirectly [through super funds] by Australian families.” In making these decisions on rates, the bank was “striving to be fair, while staying strong”.

But the push for a royal commission is coming not so much from the issue of rate cuts not being passed on as from the scandals.

The most damning point of the day for CBA was the admission that despite the sometimes wrong, unfair and downright mean behaviour of CommInsure, its insurance arm, no one had been sacked. All that had happened so far, on Narev’s account, were “some consequences related to remuneration” for some individuals.

This followed hard on the heels of the story, reported by the ABC this week, of CommInsure refusing a pay out for a woman whose death it claimed was suicide despite the coroner’s finding that it resulted from an accidental overdose (of her father’s sleeping pills). Narev described CommInsure’s behaviour in this case as “not a customer-friendly process”.

Narev was amenable to the idea of a tribunal to which aggrieved people could go – a suggestion that was advocated by some government backbenchers - although he said there would need to be certain conditions.

The day wasn’t the farce critics had claimed it would be. The interrogation was wide-ranging and at times quite aggressive. There are questions on notice to be answered and documents to be provided. But it also highlighted that the committee, because of inadequate time and lack of resources and expertise, cannot do the deep dives.

The government will continue to hang out against a royal commission but will lose skin in doing so because it is seen to be protecting the banks.

In this regard, it was perhaps not a good look when Narev confirmed that former Liberal federal director Brian Loughnane is among those enlisted to help the Commonwealth “in thinking through how we respond to a number of issues”.

Those issues were – of course – about “putting the best foot forward for customers and the families that own us”.