The Unpleasant Truth About Australian Banking

Almost every Australian has a relationship with their bank. In today’s cashless society it’s practically impossible to get by without a bank account and reliance on electronic transfers. Debt is the norm. Therefore, today’s customers expect an easy relationship as banking and financial services are essential.

Following the 1981 Campbell Committee report, there was a seismic shift in banking competition. The sector went through a period of rapid expansion for the next ten years, and with expansion came excesses in certain areas. However, the House of Representatives commissioned a report to assess whether deregulation might have gone too far.

On 27 November 1991, the Standing Committee on Finance and Public Administration tabled a report on its inquiry into deregulation and competition in the banking and finance industry. This review was carried out by the Martin Committee and was titled a Pocket Full of Change. In carrying out the review, the committee members were required to travel widely drafting the report.

The Martin Committee

Recommendations in the Martin Committee’s report made a case for drafting a Code of Banking Practice. Martin Committee’s members included:

Stephen Martin (Chair)

J.N. Andrew

R.A. Braithwaite

R.I. Charlesworth

B.W. Courtice

A.J. Downer

S.C. Dubois

R.F. Edwards

R.P. Elliot

G. Gear

R.S. Hall

L.J. Scott

A.M. Somlyay

The Hon Paul Keating was Prime Minister.

With this report, a government task force was set up to draft a Code, with input from banks, consumer groups and government agencies. However, the ABA undertook the responsibility of drafting the first Code in 1993.

Not surprisingly, there were glaring differences between the government task force’s recommendations and the final ABA version, with the balance of power once again shifting back to the banks.

The Wallis Inquiry

In 1997, the Wallis Inquiry recommended to the government that rather than relying on the integrity of bankers, they should introduce co-regulation. Regulatory bodies, with comprehensive responsibilities to enforce consumer protection in the banking and finance sector would carry this out.

Members of the Wallis Committee (1997), were:

Stan Wallis (Chairman)

Bill Beerworth

Prof. Jeffrey Carmichael

Ian Harper

Linda Nicholls

Following her time as a member of the Wallis Inquiry, and having recommended to the government it should introduce co-regulation rather than self-regulation and relying on the integrity of banks, Linda Nicholls was appointed Director, St George Bank Limited. She remained in that position from 26 August 2002 to 1 December 2008.

Outcomes of the Wallis Inquiry included the government establishing several industry regulators: ASIC, APRA and later ACCC. Each was responsible for to enforcing provisions of the banks self-regulated codes, and other legally enforceable regimes. It was intended this would improve consumer protection for individual and small business customers of banks.

Between 1997 and 2003, Prime Minister, John Howard, Treasurer Peter Costello and Minister Financial for Services and Regulation, Joe Hockey headed the government’s task force team. They relied on government and non-government bodies to promote policies to improve banking performance and develop customer protection safeguards.

At the same time, senior bankers and the ABA gained influence with a government actively seeking to de-regulate the banking sector.

The Reserve Bank of Australia (RBA)

The primary purpose of the RBA is to conduct national monetary policy and ensure maintenance of a strong financial system.

It was formed in 1959 by virtue of the Reserve Bank Act 1959 and since 1996, the RBA Governor and Senior Officers have appeared twice yearly before the House of Representatives Standing Committee on Economics to report on monetary policy and matters falling within the responsibility of the Reserve Bank.’

Between 1995-2003, the RBA Board comprised:

Frank Lowy (member 1995; re-appointed 2000)

Jillian Broadbent (7 May 1998 until 2003)

Donald McGauchie (appointed March 2001)

Ian Macfarlene (Chairman in March 2001)

Dr S A Grenville

E A Evans

Hugh Morgan AO (Reappointed for 5 years, 29 July 2002)

R F E Warburton

Prof. Warwick McKibbin (Appointed July 2001), and

Dr Ken Henry (Noted as part of 2001 board)

Australian Securities and Investments Commission (ASIC)

The Wallis Inquiry’s recommendations included a need for a regulator to oversee market integrity and consumer protection. As a result, ASIC was established.

Since 1999, ASIC Board members included:

David Knott (Deputy Chair 1999, Chair, 18 November 2000);

Jillian Segal (Member 1997, Deputy Chair 2000 until 2002);

Peter Day (Deputy Chair until January 1999)

Alan Cameron

Prof Berna Collier (2001 – 2004)

Prior to 2001, this organisation was called the Australian Corporations and Financial Services Commission. Its function was to contribute to Australia’s economic reputation and wellbeing by ensuring financial markets were fair and transparent, supported by confident and informed investors and consumers.

ASIC commenced operations on 1 July 1998, following an overhaul of the nations regulatory framework in order to permit markets to adapt to challenges of the current and emerging corporate and financial environment.

Australian Prudential Regulation Authority (APRA)

APRA was established and currently oversees prudential regulation of authorised deposit-taking institutions, insurance companies and superannuation funds.  It was created as a statutory authority on 1 July 1998.

Since May 2000, Board members included:

Dr Jeff Carmichael (from 1998, Chair 17 March 2008)

Graeme Thompson (appointed 1998, CEO 17 March 2008)

Alan Cameron (ASIC representative)

Ian Macfarlene (RBA representative)

Dr John Laker (RBA representative)

Donald Mercer (appointed June 1998 for a 5-year term)

Prof. David Knox (appointed June 1998)

Ms Marian Micalizzi (appointed on 10 May 2000)

Dr Robert Austin (appointed1998 until 2000)

Rod Atfield (appointed 2001 until 2006)

Australian Competition and Consumer Commission (ACCC)

The ACCC was established at the same time with the primary purpose of ensuring individuals and businesses comply with the Commonwealth’s competition, fair trading and consumer protection laws.

ACCC Commissioners (1997 – 2005), were:

Prof Allan Fels (Chairman 1999 until 30 June 2003)

Allan Asher (Deputy Chairman July 1999)

Sitesh Bhojani (from 10 November 1999)

Dr Tom Parry (November 2000 until 6 June 2005)

Alan Tregilgas (November 2000 until 31 March 2004)

Ross Jones (From 4 June 1999 until June 2004)

John Martin  (From 4 June 1999 until June 2004)

Teresa Handicott (From 4 June 1999 until 2002)

Rhonda Smith (From 4 June 1999 until June 2002)

Don Watt (From 4 June 1999 until June 2002)

Warwick Wilkinson AM (From 4 June 1999 until 2002)

Prof Doug Williamson (From 4 June 1999 until 2002)

Graham Scott (From 4 June 199 until 1 April 2001)

Andrew Reeves (From 4 June 1999 until 2001)

Paul Bexter (from 4 June 1999 until 30 June 1999)

Dr David Cousins (from 14 July 1999 until 2002)

Yasmin King (From 27 October 1998 until 2001)

Jennifer McNeill (22 July 2002 – 2007)

Rod Shogren (May 1997 until 29 April 2002)

Graeme Samuel (Deputy Chair 2002, but majority vetoed it)

Ed Willett (nominated 2002 and later confirmed)

Senate Committee Report webpage (Sub No. 90): Click Here…


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