Banking is not what it used to be. In the digital and deregulated age, it has become bigger, faster and omnipresent. Money can be moved almost anywhere and at any time of any day. Compulsory superannuation has given everyone a stake in the market. Financial advice has become a mainstream service.

The new world of banking offers a range of opportunities to consumers. But it also presents new problems. The global financial crisis (GFC) demonstrated how incredibly complicated and interwoven markets have become, and the scale of the problems that this can cause. The Greens recognise that banks provide an essential service. But they have also become too powerful and too greedy.&nbsp

The Greens

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 Printed and authorised by Senator Richard Di Natale, Parliament House Canberra ACT 2600.    Page 1 of 2 
Banking is not what it used to be. In the digital and deregulated 
age, it has become bigger, faster and omnipresent. Money can 
be moved almost anywhere and at any time of any day. 
Compulsory superannuation has given everyone a stake in the 
market. Financial advice has become a mainstream service. 
The new world of banking offers a range of opportunities to 
consumers. But it also presents new problems. The global 
financial crisis (GFC) demonstrated how incredibly complicated 
and interwoven markets have become, and the scale of the 
problems that this can cause. The Greens recognise that banks 
provide an essential service. But they have also become too 
powerful and too greedy. 
> A ROYAL COMMISSION 
The Australian financial sector has been riddled with scandals 
over recent years. Misconduct has been uncovered at the 
financial advice arms of the Commonwealth Bank, National 
Australia Bank, ANZ and Macquarie. ANZ and Westpac have 
been charged with rigging interest rates. The Commonwealth 
Bank is alleged to have fraudulently denied life insurance claims. 
And the full horror of the collapse of forestry investment 
schemes has implicated ANZ and Bendigo & Adelaide Bank. 
These scandals have been uncovered thanks to the bravery of 
whistle-blowers, the determination of investigative journalists, 
and the work of senate inquiries. But there is much more that 
needs to be explored, including the collapse of forestry 
managed investment schemes which is grounds alone for a 
Royal Commission based on scale of loss.  
A Royal Commission with all of its resources and coercive 
powers is needed to uncover the full extent of misconduct in 
banking and insurance. A Royal Commission would be able to 
examine the structural issues that unpin this behaviour. A Royal 
Commission would give victims of white-collar crime a platform 
for their story to be heard in full. Royal Commissions have been 
used to examine financial scandals in the past, most recently 
after the collapse of HIH Insurance. A Royal Commission would 
cost $53 million. This is a good investment and it is what is 
needed to get to the heart of the problem. 
> RETAIL VS INVESTMENT BANKING? 
At the heart the modern financial system is the ‘vertically 
integrated’ business model. Investment products 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. Consumers have been 
sold risky and convoluted financial products that they cannot be 
expected to make informed decisions about. Ordinary people 
have lost money after being advised against their best interest. 
The Greens would use a Royal Commission to fully examine the 
problems associated with the ‘vertically integrated’ model. This 
would include looking at ‘breaking up the banks’ to separate 
retail banking from financial advice and investment banking. 
> PAYING FOR BEING TOO-BIG-TO-FAIL 
Australia also has one of the most concentrated banking sectors 
in the developed world. The ‘big-four’ hold nearly 80% of the 
loans market.
1
 The Commonwealth Bank, National Australia 
Bank, ANZ Bank and Westpac are all too-big-too-fail.  
The problem of too-big-too-fail became acute at the height of 
the GFC. To safeguard against a run on the banks, the 
government introduced a deposit guarantee. This guarantee 
remains in place, but the major parties have abandoned a plan 
to apply a levy for the privilege. 
The big banks also benefit from the market’s expectation that 
the government will bail them out. The Reserve Bank estimates 
that the market advantage of being too-big-to-fail is worth 
between 20 and 40 basis points on the cost of credit.
2
 
So the government covers the big banks’ risks but they don’t 
have to pay a cent. This creates moral hazard and leaves the 
public exposed to private losses. The Greens would apply a tax 
deductable levy of 0.20% on the asset base of institutions worth 
                                                          
1 
APRA, Quarterly Authorised Deposit-taking Institution Performance, 
September 2015. 
2
 Australian Financial Review, Taxpayer subsidy worth billions for major 
banks, 26 May 2016. 
BANKING AND FINANCE 
Standing up to greed and power 
A Royal Commission and stronger consumer protections 
The financial sector has been riddled with scandals in recent 
years. The five largest banks have all been implicated. Tens of 
thousands of Australians have been wronged. A Royal 
Commission is needed to get to the heart of the issue, and 
stronger regulations are needed to protect the public. 
  
 
Printed and authorised by Senator Richard Di Natale, Parliament House Canberra ACT 2600.    Page 2 of 2 
greater than $100 billion. This measure would raise nearly 
$15 billion over the forward estimates. 
The rate of the levy is equal to the lower bound of the RBA’s 
estimate of the value of an implicit government guarantee. It is 
also the value suggested by the IMF based on the average 
benefit of implicit guarantees throughout the G20.
3
 
> PENALTIES FOR WHITE-COLLAR CRIME 
The recent spate of financial scandals indicates that current 
penalties for misconduct are not sufficient to deter bad 
behaviour. Many companies seem to be factoring in the 
relatively small fines as the cost of doing business.  
The Greens would increase the level of penalties that can be 
applied to make them commensurate with those applied in 
other advanced economies. For criminal offences, this would be 
the greater of $5 million or 3 times the benefit gained. For civil 
and administrative offences, this would be the greater of $1 
million, or 3 times the benefit gained. 
The Greens would also increase the range of administrative 
penalties available to regulators so that they are more easily 
able to penalise those who have done wrong. This would 
include making ‘on the spot fines’ available for smaller offences. 
These would require a lower burden of proof and would help 
regulators avoid costly and protracted court cases. 
Finally, The Greens would make it easier for regulators to 
pursue recovery of ill-gotten gains. Currently, ASIC and other 
regulators need to engage prosecutors to pursue the proceeds 
of crime. In combination with the increased level and range of 
penalties, this will provide real deterrence and force financial 
institutions to improve their culture. 
> WHISTLE-BLOWER PROTECTIONS 
In the previous parliament, the Greens negotiated with Labor to 
pass new laws to enshrine legal protections for public servants 
and contractors that expose wrongdoing in the public service. It 
is time to extend these protections to private sector workers.  
But offering legal protections is not always enough for people to 
risk their financial security, job security and mental health. It is 
time to follow the lead of US and provide rewards for whistle-
blowers that expose misconduct that enables authorities to 
reclaim money. The US False Claims Act offers whistle-blowers a 
defined proportion of reclaimed money that is found to be 
wrongfully gained. 
> BETTER CONSUMER PROTECTIONS 
Banks and other lenders continue to charge fees and interest 
rates that do not reflect the cost of the service and are not 
made clear to consumers. These charges disproportionately 
impact upon the young and poor. 
Principal among exorbitant fees are those charged to use ATM 
machines. It should not cost consumers $2.50 to access their 
                                                          
3
 IMF, A Fair And Substantial Contribution By The Financial Sector: Final 
Report For The G-20, June 2010 
money. In line with recent changes to credit card fees, The 
Greens would make it illegal to charge excessive ATM fees. 
Payday lenders business model involves enticing vulnerable 
consumers into a debt trap. The Greens would cap 
establishment fees at 10% for loans less than $2,000, and cap 
monthly repayment fees at 2%. These are the levels originally 
proposed by Labor when they were last in government. 
The Greens would also reinstate the time limit on banks holding 
unclaimed monies in dormant bank accounts to three-years. 
The government extended the period before a bank has to hand 
over money to seven-years. This means consumers have to wait 
another four years to retrieve ‘forgotten’ money with the help 
of a publicly searchable database.  
Finally, The Greens would introduce a system of full account 
portability. The digital age makes ‘identity transfer’ relatively 
easy. People can carry mobile phone numbers from one 
provider to another. The same option should be available to 
consumers in banking. The Greens would require the adoption 
of a common data system to make it easier to change banks. 
> STOP GIVING HOUSING A FREE PASS 
Australia is in the midst of a housing bubble that is being fuelled 
by speculators. However, investment property is not treated as 
a financial product. This has allowed dodgy developers to entice 
people into projects that have not gotten off the ground. It also 
allows ‘property investment providers’ to provide financial 
advice that they are not qualified to provide and for 
commissions to be passed on to mortgage brokers. This is 
exacerbating the level of speculation in the market. The Greens 
would include loans for investor properties within regulatory 
framework for financial advice to provide consumers the full 
range of protections. 
The Greens would also prohibit superannuation funds from 
direct borrowing to invest in housing. The Financial System 
Inquiry warned that continued growth in borrowing for housing 
by superannuation funds could pose a risk to the financial 
system. However, the recommendation to limit borrowing by 
superannuation funds was ignored by government. 
> INDEPENDENT DISPUTE RESOLUTION 
Australia does not have a truly independent dispute resolution 
body to help consumers reach agreement with banks and 
financial advisors outside of the courts. The Financial 
Ombudsman Service is the main dispute resolution body for 
banks and financial advisors. However, it is a membership 
organisation and its members are banks and financial advisors. 
In recent years, issues have arisen with the Ombudsman’s 
ability to address consumer concerns as a result of funding 
constraints. 
The Greens would establish an independently constituted 
Ombudsman as a government regulatory body. The 
Ombudsman would continue to be funded by the banks and 
financial advisors by way of a levy based on market size. 
However, the government would approve the target budget for 
the Ombudsman on the basis of consumer need. 


Banking and finance

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