A story in the Sydney Morning Herald caught my attention last week. Below is the snippet.
The heads of the big four Aussie banks faced a grilling last week from the government in the hopes of creating a case for a Royal Commission.
And now banks have charged the government a $22.50 processing fee for each question answered during the enquiry.
The 30,889 questions asked during the three days of the inquiry racked up a $695,000 fee.
When the government challenged the fee, the bank replied it was in line with current banking practices. They said that the government had gotten a deal at $22.50 per question.
‘We’re working hard to keep fees for our customers to a minimum. That’s why we’ve reduced our question-answering fee from $50 to just $22.50 this year. It’s our way of saying ‘thanks’ for banking with us.’
OK, you got me.
The story is not true, it was originally written by the satire website The Shovel, and republished by newspapers nationwide in their satire sections. But it could very well be real.
Royal Bank of Scotland has just settled a lawsuit with the US regulator over toxic residential mortgage backed securities. Under the agreement, the bank does not admit fault.
RBS has not revealed the amount they settled for. Only that the amount is well covered by the US$3.8 billion they set aside for lawsuits. But rest assured, the amount was high, as the opposing party was seeking a whopping US$1 billion.
And the tax payers are picking up the cheque on this one. You see, the government bailed out RBS in 2008 and it is still 73% government owned.
The fact is that banks have been behaving badly. And now they are facing questions for it, and even paying fines in the millions.
European banks have been setting funds aside for litigation for years now. According to Reuters, between 2008 and 2015, European banks set aside US$160 million for legal costs. This is almost half of their profits.
Banks like Deutsche Bank, UBS and Lloyds provisions for legal costs actually exceeded their profits. And this trend will continue or even increase as we discover more wrongdoings.
According to ASIC, the big four have already paid out $200 million in compensations to customers and investors since starting client remediation programs.
And Australia is not the only place where the big four are facing questioning. US hedge funds are suing the big four, along with 13 other international banks, for manipulating market interest rates.
ANZ’s CEO Shane Elliott said it best during the inquiry:
‘I think as an industry we’ve lost touch with our customers and we have become too internally focused and forgotten our role in society at large. That’s taken us down a path that’s led to bad behaviours and poor culture and really not treated customers with the respect they deserve.’
Gone are the days when banks had an image of solid and reputable, consumer oriented institutions.
Let’s hope that at the end we are not the ones picking up the bill.
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