This post first appeared on the Sensible Centre newsletter in Australia…
What a farce was the Banking Royal Commission! Collusion between Liberal and Labor in Canberra ensured that nothing happened. Business-as-usual prevailed. When a banking cartel is sponsored and protected by a political cartel – where protection of incumbents from competitors is the shared modus operandi of both – no-one should be surprised.
Recovery from the economic recession imposed by Australian governments will require a freeing up of market competition and a dismantling of all the institutional components of crony capitalism.
Breaking-up the Big Four Banks sits at the top of our economic recovery agenda:
1. Prohibit banks from operating in superannuation, insurance, wealth management and financial planning markets as a condition of holding a banking licence;
2. Introduce a cap on market share by any one bank of 20% in any domestic market segment, and a forced divestiture of assets by any bank which exceeds the cap;
3. Prohibit banks from owning equity in other corporations, to prevent banks from acquiring a dominant place in the national economy and to ensure banks remain servants of other corporations, not their masters;
4. De-commission ASIC and APRA and replace them with new regulatory bodies which have structural safeguards against their regulatory capture by the Big Four Banks and other financial institutions, including a statutory life-time ban on members of the boards and senior management of these regulatory bodies from accepting board or senior management positions in any entity subject to their regulation.
5. Introduce mandatory prison sentences for bank executives or directors who breach ASIC reporting or disclosure requirements, or Trade Practices Act provisions dealing with anti-competitive behaviour, price fixing or collusive behaviour;
6. Remove institutional impediments to transfer of a customer’s business from one bank to another, and prison sentences for bank executives who place obstacles or delays in this process;
7. Create a level playing field for all financial institutions, removing product and function restrictions favouring the Big Four, easing the regulatory and compliance burden for small institutions, and removing regulatory impediments to the formation of new banks, credit unions and building societies.
Will Left or Right take up this agenda? The Right can’t do it because they are blind to the way in which markets generate concentrations of power every bit as pernicious as concentrations of state power. The Left can’t do it because they are blind to the way regulatory capture renders public regulation ineffective.
The result is that both Left and Right uphold and protect the Big Four banking cartel while paying lip-service to popular antagonism to banks. Neither can change course.