25th Sept 2017
No-one should be hoodwinked into believing that the move by the big four banks to drop withdrawal fees on automatic teller machines is all about putting the customer first.
While consumers will no doubt benefit from avoiding pesky $2 slugs that can add up to hundreds of dollars over a year, the planned, if not coordinated, decision is mostly about banks doing what it takes to avoid a royal commission into bad banking behaviour.
The Commonwealth Bank’s play was media strategy 101 — roll the ATM decision out on a normally quiet Sunday, dominating news bulletins and forcing Westpac, ANZ and NAB to quickly follow to avoid being left behind.
While there is no evidence of price signalling or collusion, the rapid rollout of rare positive news demonstrates how closely banks negotiated within the rules to kill-off “foreign” transaction fees between their independent ATM networks, with CBA breaking ranks to seize the first mover advantage.
The positive spin throughout the day and on Sunday evening television news bulletins sent the message that the big four were “listening” to customers and were working hard to address image problems at a time when banks are on the nose more than ever.
Cynics have suggested that banks will make up the missing ATM fees elsewhere within their complex systems.
However, Australian Bankers Association chief executive Anna Bligh rejected the suggestion that banks will continue doing what they do best, assuring the ABC’s AM program that “no – it’s a hit to the bottom line.”
There’s a BEAR in there
Bank bosses have no doubt become even more focussed after Treasurer Scott Morrison rolled out the Banking Executive Accountability Regime (BEAR) late on Friday.
If passed, as expected, an even tougher world of accountability for bankers will be in place from July 1, 2018.
The potential risk of penalties, deferred bonuses and disqualifications for dodgy behaviour is the latest hard-hitting threat to bring banking bosses to heel.
So expect a few more concessions from the big four, especially as they prepare for their half-yearly grilling before the House Economics Committee next month.
The hearings will be held over two days in October where the four chief executives — Ian Narev from CBA, Shayne Elliott from ANZ, Andrew Thorburn from NAB and Brian Hartzer from Westpac — can expect to be questioned intensely about how banks are making amends and getting to the core business of serving customers.
The proposed BEAR law was a result of recommendations from the committee’s most recent hearings.
The various scandals, particularly at the Commonwealth Bank, have damaged not just the banks’ brand images but trust among politicians, regulators, shareholders, customers and their own staff at the coalface.
Under-fire banks starting to walk the walk on culture
After months of talking about “culture” within banks, boards and their chief executives appear to be walking the walk.
The latest flashpoint for CBA was the financial intelligence agency AUSTRAC’s court case relating to almost 54,000 alleged breaches of anti-money laundering and terror financing laws.
As a result, chief executive Ian Narev will leave the bank by June 30, 2018, while Mr Narev and members of his executive team had their 2017 short term bonuses cut to zero, with non-executive directors also taking a pay cut.
CBA chairman Catherine Livingstone announced a boardroom shakeup with a few new faces, such as Westpac’s former institutional banking boss Rob Whitfield, in an attempt to restore credibility and to rebuild the CBA’s shattered reputation.
While dumping ATM fees is not purely tokenistic given the foregone revenue — which amounts to around half a billion dollars across the sector — the decision underscores fears about tougher regulation and more intervention, not just under a traditionally business-friendly Coalition Government but also what might happen if Labor is elected.
Banks are busily clearing the decks of troublesome business units, the most recent being CBA’s deal to offload its CommInsure Life arm to Hong Kong-listed insurer AIA.
While the scandal-plagued CommInsure brands will not immediately disappear, AIA regional chief executive Bill Lisle has conceded that the name could fade over time as new products are introduced.
The Commonwealth Bank said the CommInsure brand will remain for general insurance products, but behind the scenes and with the public the brand now resonates with unethical behaviour revealed in an investigation by the ABC’s Four Corners and Fairfax Media.
CBA’s embattled head of wealth management Annabel Spring will leave the bank as a result of the AIA acquisition.
With a separate inquiry into CBA by the Australian Prudential Regulation Authority (APRA) about to get underway, banks are getting their books in order, especially to prove they are “unquestionably strong” as the regulator has ordered.
In addition to selling CommInsure for $3.8 billion, CBA is looking at spinning-off and floating its Colonial First State Global Asset Management arm as it recalibrates its focus back to core business.
The sale of CommInsure alone gets the CBA’s tier one capital reserves ahead of APRA’s 10.5 per cent requirement.
While bank executives on multi-million-dollar deals are well compensated for copping government and regulatory heat, bank staff facing the public endure a more direct form of backlash.
The merger of CommInsure Life and AIA is already creating tensions, with CBA staff unsure about their futures and whether eventually duplicate jobs will disappear, as is often standard with mergers and acquisitions.