Death and taxes are the only two certainties in life. They’re the un-pleasantries that you can always count on.
But usually, those two things are mutually exclusive from one another. When you’ve left this earthy realm, generally you don’t expect the tax man to be sitting in the pews at your funeral, demanding that you cough up some cash.
Nor do you expect Commonwealth Bank to start knocking on your coffin demanding fees for financial services you haven’t received.
Especially when you’ve been haven’t been alive to receive such services for over a decade.
Now, this scenario obviously seems farfetched. Something that a well-established and respected corporation such as Commonwealth Bank surely couldn’t be accused of.
But we’ve reached a new low here, folks. Because this is exactly the charge that surfaced last week at the Royal Commission into banking.
Commonwealth Bank’s financial planning branch has admitted to charging fees to customers they knew had died, including one case where billing continued for a decade.
Although CBA had given the advisor a ‘formal warning’ for charging fees to a man who had passed away in 2004, the billing continued for the next decade.
This kind of slip-up is blundering incompetence at the least, and unadulterated greed at the most. Either way, CBA currently has to repay more than $100 million in fees charged for no service. Which, out of all the banks, is the highest level of compensation demanded so far.
But as the Royal Commission isn’t over, it’s likely this figure will continue to rise.
The profit-driven lies continue
In the course of the hearings, we have seen case after case of gross misconduct splashed across the headlines. The banks’ dirty laundry has been aired for the whole nation to see. And no doubt it will take some time for the public to regain their trust in the banks, if there ever was any to begin with.
As the chairman of the Australian Securities and Investments Commission (ASIC), James Shipton confirmed,
‘There is a trust deficit between the financial industry and the broader community.’
After all of the revelations, the broader community has a right to be suspicious. Because it seems that in the world of banking, everyone is fair game. Perhaps that is why, in addition to charging fees to deceased people, CBA staff thought it was appropriate to illegitimately activate customers’ YouthSaver accounts with their own funds to improve their incentive bonuses.
By making small deposits of 10 cents or less into these kids’ accounts, CBA staff were able to make it appear as if the accounts were active. In response to these allegations, Federal Opposition finance spokesman Jim Chalmers said what we were all thinking:
‘These new revelations about the meddling of little kids’ bank accounts are extraordinarily troubling.’
But what is perhaps more troubling, is the Australian Competition and Consumer Commission’s (ACCC) statement on Friday which revealed that ANZ bank, its Group Treasurer, Rick Moscati, and several other companies will be charged with involvement in a criminal cartel.
Although details about the charges are still emerging, we know they will be laid in relation to a cartel arrangement for the trading of ANZ shares. As ACCC chairman Rod Sims confirmed, ‘It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct.’
This highly illicit act is likely to see ANZ face a long trial, and could cause their share price to plummet significantly. It is yet another low for the big four banks, and a massive chip in the credibility of the financial sector.
Whether or not things are likely to change in the future is up for debate. Since the hearings began, ASIC has been inundated with waves of customer complaints about the bank’s professionalism — with customer grievances having risen by 20%. The banks have also begun to dob themselves in, with breach notices filed with ASIC having risen by 40 percent.
Although this has come too late to prevent some of the most egregious cases of profit-driven malpractice, this is a step in the right direction for greater transparency from the banks.
Overall, the Aussie economy could be in for a shake-up. With CBA having been exposed for trying to pry money out of your cold, dead hands, and ANZ now being associated with the word ‘cartel’, Australians’ perception of banking is going to change.
How this financial upheaval plays out will be a major focus for policy makers and the financial sector at large. And as investors, it will be very interesting to see how the market reacts.
Hopefully it will be almost as entertaining as watching bankers squirm in their courtroom hot seats.
This week in Markets & Money:
As we all know, the property market is deflating. And lenders and developers are getting creative with ways to breathe life back into the housing sector. As Selva wrote on Monday, the latest initiative involves an ‘Afterpay’ model for real estate. Which could stir up some interesting results…
To read the full story, click here.
Australian housing could be headed for a Minsky moment. This theory dictates that, after a long period of growth, asset values are pushed up due to speculation using debt. But if economic screws are tightened, borrowers won’t be able to sell their assets at the previous highs. As Selva wrote on Tuesday, with housing starting to cool in Melbourne and Sydney, we may need to start preparing for a correction.
To learn more, click here.
Change is the only constant in life. But economists and investors sometimes forget this fact and attempt to predict market moves based on past performance. As Selva wrote on Wednesday, the future is very uncertain for the stock market. And we should all be preparing for a potential crisis…
To find out more, click here.
If you’re not following the Italian election saga, you should be. Because Italy, as one of the EU’s largest economies, may very well be the starting point for the next economic crisis. As Selva wrote on Thursday, Italy’s political turmoil could send waves through the rest of the world’s economies. So as an investor, it’s worth keeping an ear out…
To learn more, click here.
Economists are predicting that bitcoin’s price may hit zero very soon. Some are even predicting that it will be ‘extinct’ in 100 years. But as Selva wrote on Friday, in the scheme of currency, this isn’t something that we should be worrying about…
To find out why, click here.
Until next week,
Editor, Markets & Money