How Misbehaving Australian Banks Are Causing Global Pain

Years of scandals have caught up with Australia’s big banks. A government-appointed inquiry into bank misconduct has lambasted the lenders for pursuing profit at the expense of basic standards of honesty. An interim report by the inquiry, known as the Royal Commission, has exposed a laundry list of wrongdoing, from extracting fees from dead customers to lying to the regulator. With politicians promising action ahead of a national election next year and the final report not due until February, the pain is far from over. Already this year, more than than A$38 billion ($27 billion) has been wiped off the market value of the big four banks and wealth manager AMP Ltd.

Australia’s four biggest banks -- Commonwealth Bank of Australia, Westpac Banking Corp., National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. -- have been plagued for years by scandal. Accusations run the gamut from giving misleading financial advice to trying to manipulate a benchmark interest rate. Simmering public resentment -- stoked by a sense banks were gouging fees to fuel record profits and executive pay -- boiled over in 2017 when Commonwealth Bank was sued for systemically breaching anti-money laundering rules. A separate probe into culture and governance at the bank concluded there was a “widespread sense of complacency” from the top down that blinded the lender to risks. The government, which had spent months insisting a wide-ranging probe wasn’t necessary, finally bowed to pressure and called the Royal Commission inquiry in November.