A People's Bank
Australia’s financial sector is defined by the power of the big-four banks, the money they make off housing loans and their billion dollar annual profits to shareholders. In the face of ongoing misconduct and price gouging, it’s time for Government to step in and ensure that there is a low-cost banking service, backed by the RBA, that is focused on the everyday savings and mortgage needs of customers.
Imagine a bank whose real goal was to serve its customers, not line its shareholders’ pockets. The Greens will use the Reserve Bank of Australia (RBA) to establish a People’s Bank to provide basic low-risk banking services to the public. At the People’s Bank, everyday Australians would be able to establish accounts directly with the RBA for day-to-day banking facilities. Customer service would be provided online, by telephone, or face-to-face through Australia Post and other partners. Everyday banking for public good, not profit margins!
Products provided to the public by the People’s Bank would be:
· Savings accounts pegged to the RBA cash rate, with debit cards linked to these accounts also available.
· Mortgage tracker accounts pegged to the RBA cash rate.
People banking with the People’s Bank can also have confidence that their savings won’t be used for inappropriate investments, such as new coal mines.
The Greens also have a a wide-ranging package of measures designed to improve the integrity of the financial system and to stop customers from being ripped off.
1. A Royal Commission to look at the vertically integrated banking model
The Greens have complained for many years for a Royal Commission into the integrity of Australia's financial system.
The Greens have proposed terms of reference for the banking Royal Commission that draw upon previous inquiries such as the HIH Royal Commission, and moved in Parliament for a Commission of Inquiry before the Labor and Liberal parties reluctantly followed.
At the heart the modern banking system is the 'vertically integrated' business model. Investment products and insurance are now being offered alongside conventional deposit and loan services. This has created conflicts of interest between what is good for a customer and what is good for a bank.
A Royal Commission is needed to fully examine the 'vertically integrated' model including to actively consider not just the problems caused by vertical integration but make clear recommendations on how the banks could be regulated such that they would have to divest their insurance and financial advice arms.
2. Increased penalties for white-collar crime to fund whistle-blower rewards
Penalties for white-collar crime are too low. They are not enough to deter bad behaviour. Big business is simply factoring them into the cost of doing business. The Murray inquiry found that 'current penalties are unlikely to act as a credible deterrent against misconduct by large firms'.
Penalties have to hit these fraudsters and market-manipulators where it hurts. The Greens want to see people penalised with fines up to three times the amount of money that they gained from the wrongdoing in the first place.
The Greens would also increase the minimum available penalties to $5 million for all criminal offences and $1 million for all civil proceedings. And the Greens would also allow regulators to pursue the proceeds of crime (disgorgement) to retrieve profits that have been wrongfully gained.
The proceeds from these increased penalties would be used to fund a rewards system for whistle-blowers based on the US False Claims. Whistle-blowers risk their working life when they come forward with information. People need to be rewarded to help encourage them to speak-up when they see something wrong.
The Parliamentary Budget Office was unable to provide an accurate cost of this policy given that data on proceedings is not collected in a central point. However, it is expected to have a net positive impact on the budget.
3. Bringing housing into the financial regulations
Australia is in the midst of a housing bubble that is being fuelled by speculators. But, bizarrely, investment property is not considered a financial product under the Corporations Act. This allows 'property investment advisors' to offer financial advice without having any qualifications, and for commissions to be passed on to mortgage brokers.
We have seen real estate agents set up pseudo-financial advice businesses to funnel people into negative gearing, and developers paying commissions. The entire problem with the financial advice scandals of recent years has been that sales people were offering advice that was in the company's interest and not in the interest of the client.
The Greens would also follow the recommendation of the Murray inquiry and prohibit superannuation funds from direct borrowing to invest in housing. This recommendation was ignored by the government despite the warning that this could pose a risk to the financial system.
The measures do not involve any additional government expenditure.
4. Bank account portability
The Greens want it make it easier to change your bank than it is to change your mobile phone carrier or internet provider. Currently the banks have a massive edge over consumers by making it so painful for you to change banks.
People can change mobile phone providers and keep the same number. The same option should be available for in banking. There is no technical impediment. The digital age makes this simple.
The ATO has set up an app to allow you to change your superannuation account; there is no reason why ASIC can't do the same with bank accounts.
So when your bank starts to screw you on ATM fees or interest rates you should be able to pack up and move to another bank with a just a few clicks on your phone.
The Greens would introduce a system of full account portability. Banks would be required to adopt a common numbering format that enables consumers to easy move accounts from one bank to another.
This measure does not involve any additional government expenditure.