The banking industry in Australia
is dominated by 'The Big Four'; National Australia Bank, ANZ,
Westpac & Commonwealth. They are all owned by the same financial interests;
HSBC Custody Nominees, J P Morgan Nominees Aus Ltd, National Nominees Ltd and Citicorp Nominees Pty Ltd.
The major shareholders of each of the
biggest four banks are also shareholders of the other big banks. They are nominee
companies holding shares for entities that may wish to hide their identities.
Despite the billion dollars spent
each year on advertising that gives the impression that there is competition
between the 'rival' four banks, each being run by canny CEO's
paid millions of dollars to do the bidding of their majority shareholders; it
is a blatant lie.
The
four-separate-banks scenario is a deception to maintain the impression of
marketplace competition. Common ownership means monopoly profits. It is a conspiracy
that 'the Australian government wants to preserve and see thrive at all costs because the banks' success is
key to the government, and their competition is non-existent'.
The big banks' market power comes
from a huge head start provided by government during
the period of financial deregulation. The 'economic moat' set in place to
protect the four major banks provides a 'sustainable competitive advantage that allows firms to generate
positive economic profits for the benefit of their owners for an extended
period of time'.
Basically, 'the four have scale, cost, efficiency, investments,
capital advantages – flowing from their ability to use internal ratings based
capital allocation against assets, funding advantages, competitive advantages
and so on'.
The banks spent the last twenty years consolidating power by absorbing
their mid-sized rivals and exploiting the public's misperceptions while passing
on the costs of advertising to their customers.
Potential competitors have difficulty entering
the market because efficient scale arises from the highly profitable control of
a limited size market and they can share information for the purposes of avoiding
competition.
Trade Minister
Andrew Robb said "Australians need to accept that the nation is an
oligopoly economy. We shouldn't fight it. It
provides us with the critical mass and innovation to compete with overseas
countries," he said. '
'Australia has such a concentrated financial
system because the fortunate four have an immense yet simple advantage: access
to larger quantities of cheaper money'.
Steven Munchenberg of the Australian Bankers Association maintains
the fiction that the banking industry is 'fiercely competitive', despite the
big four banks having 84 per cent of home lending.
Neoclassical textbooks describe such a market as an oligopoly
because the banks have informal understandings to not unilaterally
reduce prices. Consumer deposits are guaranteed by
the government but millions of Australians believe that the big four banks are 'safer'
and so they pay more in interest payments than a 'rational' consumer would. On a $300,000 mortgage that is
an extra $1200 per year.
Australian Securities & Investments Commission (ASIC) deals
with market integrity, consumer protection and corporations. It has responsibility for regulating investment banks
and finance companies, but it does not actually investigate or propose any
regulations.
The Australian Prudential Regulation Authority
Act spawned APRA in 1998
but APRA did
not make full use of its regulatory powers prior to the collapse of HIH
Insurance in 2001nor did it go further than warning the National Australia bank about its lax
governance a year before the currency scandal was discovered in 2004. In 2014
it still seems hesitant to exercise its regulatory authority.
The Reserve Bank
of Australia came into being in 1960 as Australia's central bank and
banknote issuing authority. 'The RBA is an autonomous body, not directly
accountable to the Australian people'. '...' (Hunter 2013). It currently consists of
the Payments System Board and the Reserve Bank Board, which governs all other
monetary and banking policies. The current
Governor is Glenn Stevens who said "The Bible teaches that you should do your
job as if you were doing it for Him". The
administration was transferred in 1998 from the bank to APRA.
The Australian Competition and Consumer
Commission (ACCC)
administers the Competition and Consumer Act 2010 which is meant to promote competition, fair trading, and
protection for consumers. Its mandate is to prevent illegal anti-competitive
behaviour. It is a
criminal offence for businesses and individuals to participate in price-fixing to drive up the profits of cartel
members while maintaining the illusion of competition. The Australian Federal
Court has the jurisdiction to determine contraventions of the Act.
The Council of Financial Regulators
(CFR) is the coordinating body for Australia's main financial regulatory
agencies whose role is to promote stability in the financial system. RBA, APRA, ASIC and The Treasury meet quarterly,
chaired by the RBA Governor Glenn Stevens. All together in one big money sharing club.
The ACCC has extensive powers to
investigate the anti-competitiv, behaviour known as cartel conduct. Price
signalling occurs when banking companies disclose prices to competitors in
private, and business suppliers agree among themselves who will win and at what
price. The website http://www.accc.gov.au/business/anti-competitive-behaviour/cartels
has all of the information, but it is, all talk/no action.
'Crimes committed by
those at the top corporate level are routinely ignored or brushed under the
carpet, reports associate professor
Evan Jones, who maps a profoundly corrupt –
and criminal – establishment'.
Cartels
cheat consumers, restrict economic growth, and reduce investment by blocking
new industry entrants and locking out operators from resources and distribution
channels. Individuals
found guilty of cartel conduct are liable to face 10 years in gaol or fines of
up to $340 000. For corporations: 10 million.
'Banking is a licensed cartel operated by
rich executives, in which prices are fixed twice: first through market
manipulation by government-owned banks and then again by the privately owned
banks themselves'.
There
has been only one case to date that has considered the cartel provisions; it
was a private civil action before Justice Gordon who summarised the
legal principles in relation to cartel conduct: evidence of a consensus or
meeting of the minds of the parties, under which they give an
assurance that it will act in a certain way which may not be
enforceable at law:
"CBA, the behemoth of the
Australian banking industry, assumes that no-one can touch them as they are too
big. They assume no-one will believe they have done wrong because they are
Australia's biggest bank. They assume they are above the law and the government
will not dare go after them."
The banks are making record profits again after the financial
crisis because their dominant market position has been reinforced by long-term
industry consolidation. All that money must have gone somewhere.
It is obvious that 'TheBigFour'
operate as an oligopoly so the real question is how all of the regulatory
authorities manage to pretend otherwise; and abrogate their responsibility.
The stability and international
competitive advantages inherent in the cartel arrangement are reason enough for
a trade off. The 'regulators' ignore the law because the arrangement makes a
lot of wealthy Australians wealthier, and anchors the economy.
The entire economic system of
hyper-capitalism is basically a fraud committed against the general population
and natural environment, designed only to funnel money up to a powerful elite
who are essentially above the law.
'Australia's four
largest banks are on track for another year of record earnings, bolstered by
record-low interest rates'
'Australia
has a non-competitive, oligarchic business structure that unites big business
and government in a productivity-killing partnership that perennially erodes
the nation's standards of living. Who could deny such an undercurrent when the
past few years has re-established an untouchable banking oligopoly'.
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