Labor plans to grill bank chiefs on whether senior management puts pressure on frontline staff to upsell inappropriate products such as higher mortgages and credit card limits, even without financial remuneration involved.
Labor’s Pat Conroy, a member of the house economics committee which will question chief executives of the big four banks next week, says he had been told by numerous bank staff the pressure is not just in terms of increased pay but also pressure from senior management.
“I have met with numerous employees of the big four banks who have warned me about the incentive structures and pressure placed on them to sell product to people patently unsuited to those products,” he said.
“The classic case is people who apply for a mortgage being encouraged to apply for a larger loan than they asked for and as it often turns out, a larger loan than they can pay back.”
His comments come after Westpac chief Brian Hartzer announced the bank would be removing all product-related incentives for the bank’s 2,000 tellers from next month.
The move was in response to increasing pressure on the big banks, with Labor, the Greens and minor parties such as the Nick Xenophon Team and Pauline Hanson’s One Nation calling for a royal commission into the banks following a string of customer scandals involving life insurance, financial advice and rate-rigging allegations.
But Conroy said while removing financial incentives for selling products was a start, he said the culture of the banks meant tellers who were assisting with frontline inquiries were often pushed into sales.
“I personally went into bank to exchange some currency and what began as a simple transaction turned into 20-minute consultation on what my options were for life insurance,” Conroy said.
The house committee inquiry is set down for three days next week, with each bank chief appearing for three hours.
Conroy said the government-dominated committee, chaired by Liberal MP David Coleman, would only allow Labor MPs one hour of each three-hour hearing at most to question the bank chiefs.
Under the treasurer Scott Morrison’s reference, the committee must look at the banks’ responses to “issues previously raised” in other inquiries – without naming the scandals. But the hearings must also look at:
- domestic and international financial market developments as they relate to the Australian banking sector and how these are affecting Australia;
- developments in prudential regulation, including capital requirements, and how these are affecting the policies of Australian banks;
- the costs of funds, impacts on margins and the basis for bank pricing decisions.
As Labor prepared for the inquiry, former Labor powerbroker Paul Howes, who is now head of wealth management advisory with accounting firm KPMG, told the Australian he was opposed to royal commissions being used as “tit-for-tat exercises by political parties”.
Howes was formerly national secretary of the Australian Workers’ Union.
“I spent most of my time as a trade unionist and as a good Labor man but I don’t believe this [a royal commission] will deliver anything for average working people who may be customers of these banks,” Howes said.
Conroy rejected Howes’ assessment of Labor’s policy.
“Paul would say that given where he works now,” said Conroy.
“A royal commission is needed to break open culture of banks and determine whether we have appropriate regulatory systems.”
Conroy said it would difficult to examine individual cases because banks would claim client confidentiality, even if Labor had the permission of bank customers. He said the committee would have no power to call independent witnesses, nor the power to recall bank chiefs for follow-up questions.
