This article was originally published in the Conference Edition of the GRC Professional Magazine.
Before Adele Ferguson’s hotly-anticipated book, Banking Bad, was available in stores at the start of August, the GRC Professional Magazine was able to catch up with her to discuss her motivations for writing and to learn a little more about how the work she has done in covering events in the financial sector culminated into this book.
Why did you write Banking Bad?
I had been writing about banking scandals back as far as 2003, so I did a big exposé of Commonwealth Bank financial planning which led into many other scandals being exposed. Eventually, I exposed the life insurance scandal with Comm Insure. So, much of the work I had done had the potential really to trigger the Royal Commission, so I just felt it needed to be put into context instead of a more general ‘why did we get here?’ piece. All that required going back to the deregulation of the financial markets and looking at what were the factors at play during that time which led to us getting to a point where we don’t trust our financial services’ industry.
Could you give a few examples of what you think are some of the factors that led to the issues we have seen so far?
So, what happened was the deregulation of the financial markets, which was a good thing. It needed to happen. But the problem was there wasn’t proper regulator put in place to make sure banks’ freedoms around public interest rates and home loan rates could be monitored or curtailed. They could be competitive and they had a lot of competition from foreign banks coming in, and there was no regulator, really, monitoring what was going on.
You had the NCSC [National Companies and Securities and Commission] with a budget of $5 million and 80 people. You had a stock market crash, and you had people like Skase, Bond and Eliot, and you had a regulator with no budget.
If you keep going throughout that time, you will note that, if only a regulator had been put in place, or better-resourced, things might have gone differently. But the regulators were never properly resourced. And it was such ‘soft touch’ regulation, with the caveat being ‘buyer beware’—which was the tone that really filtered through at the time. So, you ended getting these product disclosure statements that were complicated, and people didn’t really know what they were purchasing.
That’s really a common theme—weak regulation. A
nother is the rising powers of lobby groups, which were very well-resourced and staffed with well-connected people who were there right from the beginning, any time there was any kind of scandal. You might have had an inquiry or you might have ended up with some great reports published with great recommendations, but the lobbyists just got in for the kill and diluted them.
And do you still see that happening now? Obviously, we’ve had the Royal Commission and some recommendations as a result. But do you feel like we are still in that ‘soft touch’ regulation space?
I think the regulators…well. ASIC is talking tougher, which is good. But I think we found that APRA still has a lot of work to do. I mean, just last week we had a capability review that showed its culture was still sadly wonting. And I still think we have a long way to go even with ASIC. It’s one thing to talk tough; it’s another to see how that translates. I’m open-minded, but I still think we’ve a long way to go, and if you are looking at lobby groups, well, they are still as powerful as ever. For example, one of the recommendations in the Hayne Final Report was related to mortgage brokers, and yet you still saw all the lobbying that went on. So yeah, nothing is going to happen with that recommendation.
But hopefully, we see something a little brighter happening in the future. Would say the Royal Commission has been a watershed moment?
Absolutely! It was a real watershed moment because we were able to really peel back the layers for 12 months and get a good glimpse into what has gone on. Previously, I’ve written stories that exposed little snapshots, but the Royal Commission laid bare the cultural issues and the motivations, and as a result, it was very powerful.