Australia hitting ‘peak banking bad’

In many ways the Austrac case, which has seen the Commonwealth Bank hit with a record-setting $700 million fine, is a microcosm of all that has been going wrong in our banking industry for the past two decades.

While a computer programming glitch may be the immediate cause and a convenient scapegoat, the fact that it could happen at all, let alone go unchecked until more than 53,700 breaches of the CBA’s anti-money laundering obligations had occurred, speaks eloquently of deeper causes.

The Commonwealth Bank has accepted a $700 million penalty for breaching money laundering regulations.
The Commonwealth Bank has accepted a $700 million penalty for breaching money laundering regulations.

Photo: AAP

First and foremost of these is a banking culture that lost its way sometime in the 1990s when it shifted from an ethical and prudential model to a sales and service culture.

The latter, under the guise of “maximising shareholder value”, was really about the untrammelled greed of management fuelled by out-of-control bonus schemes based on Key Performance Indicators.

The excessive short-term bonuses had exactly the effect one would expect: they focussed chief executive officers and managers on the short term. Problems were cans to be kicked down the road. Persistent problems meant it was time to go and work for another bank and let somebody else worry about it – only they never did either.

[“Source-timesofindia”]