Why it's time for a royal commission into banks
Will we finally see a royal commission into banks?
In the latest scandal to taint our big banks, the Australian Securities and Investments Commission (ASIC) is taking legal action against ANZ, NAB and Westpac for allegedly trying to profit by manipulating the bank bill swap rate.
The swap rate is a key interest rate at which banks lend to each other for short periods, and is a benchmark for financial products such as currency derivatives, floating rate bonds and business loan rates.
ASIC is suing ANZ, NAB and Westpac for unconscionable conduct and market manipulation. The banks allegedly manipulated trading to create an artificial price for bank bills and maximise their profits.
The case is expected to come to court in the second half of 2017 and, if the ruling favours ASIC, ANZ could face a fine of $44 million and Westpac and NAB could be fined $16 million and $52 million respectively.
So what does this mean for consumers?
The swap rate does not directly affect mortgage and credit card rates but a higher rate generally increases the cost of funds and is often passed on to investors and consumers.
Following hot on the heels of the recent bank scandals involving poor financial advice, these new allegations will do little to restore trust in our big banks.
It's clear that more needs to be done to investigate and wipe out what appears to be widespread misconduct in Australia's banking sector.
It's time for a royal commission into banks to recommend changes to the law to prevent unethical practices and improve the cultures of our banks. This is something far beyond what even a fully funded ASIC could ever do.