Australian banks have copped a fair bit of flack lately. Many accuse them of booking large profits while reducing staff and passing on less than the full RBA cash rate cuts all in the pursuit of very large profits. On a recent OLO thread, one poster suggested a super tax for banks to fund "social reform" spending.

However, not too long ago many were relieved that Australia dodged the worse of the GFC and this can be partially attributed to the relative conservative nature of the local banking system (in contrast to the awful situation then in the US).

My opinion is that the banks are businesses, the big dollar profits quoted are “reasonable” when compared to their turnover and they owe a return on investment to the shareholders, which include many superannuation investments which will ultimately be returned to the mums and dads on retirement (minus some fees, but that’s another topic). We need to get away from the 19th century Punch images of the fat-cat capitalist bankers and be realistic about assessing modern corporations. These institutions seem to be operating conservatively in a shaky global climate and it was this attitude that helped us dodge the direct bullet strike a few years ago (just a flesh wound).

And to put it into perspective, I’m reasonably happy with the mortgage interest rate I pay today compared to the 14% I started at in the early 90’s.

So, should we be quietly confident and thankful that the Aussie banks have a good steady hand on the tiller or should we be angry that they seem to be reluctant to follow the RBA monetary policy detail to the second decimal place and suggest that they are operating as a greedy oligopoly that is a law unto itself?

The fractional reserve system of counterfeiting our currencies must end.Banks should only be allowed to loan out money that already exists.

When banks create from nothing the money to equal our increates in productivity + inflation, this makes us their debt slaves.

Banks produce nothing of tangible worth yet are the most powerful institutions on the planet.Only sovereign Govts restricted by a proper constitution should be able to create new money that equals our productivity.This means we will all pay far less tax.It happened in Australia pre-1915 when we got the income tax. Now more taxes!

Banks produce nothing?
They under pin every thing man has achieved!
Are in it to make money not Friends.
Are private enterprises and LEND their cash.
I pay no interest, I always knew my home would be that not a status symbol, palace, I paid cash, you still can,in an area not wanted by upwardly mobile self indulgent and made it my palace.
Banks do not pretend to be Charity's.

I don't mind their conduct, it's the absolute bullsh1t they go on about to justify most of their moves. Cost of funds are hurting us blah blah blah. They really think we're stupid. They're as bad as the airline industry deciding fuel is a separate expense that needs a levy. It's a bloody cost of your business! Not my problem!

Imagine if plumbers decided to bung on a fuel levy, or a cost of tools levy. Fuel goes up and down, cost of funds goes up and down, just shut up, advertise your best rate and stop all the moaning and self serving justifications. We will never be your friend! It's business!

Or at least if you have to speak, why not just say 'we want to continue making more profit than last year for our shareholders, regardless of the general economic climate, and people are saving too much and not borrowing lately, so we'll just have to increase our margins.'

*advertise your best rate and stop all the moaning and self serving justifications*

Hang on Houllie, its not the banks doing the moaning. Its the
treasurer, its Hockey, both playing politics. Its TV sensationalism,
it keeps bums on seats, etc. The public are simply the gullible
suckers, so the banks justify their position. The moaning is being
done by the rest.

Actually I think Ozzie banks are very good, ---- at ripping us off as long as they can get away with it.

I have a couple of offset/sub accounts on my cheque account. When established a couple of years ago, in a similar interest environment, with perhaps lower offshore costs, these accounts were paying 6.25% interest.

With my last couple of statements I noticed the interest payed into these accounts had reduced somewhat, although the capital had not reduced.

When queried they admitted they had unilaterally reduced the interest on these accounts by 1.75%. They admitted they had no intention of notifying me of this fact.

Having withdrawn this money, [I'm thinking of buying gold], I have suddenly received a flood of offers from the bank, of new products, now available to me, offering similar interest to what I was receiving previously.

Yep, they are bl00dy good all right, at using sneaky ways to get at us, so Oz banks could be called good, it's just at what that is questionable.

Dear Peter Mac.,

Are Australian banks good or bad?

I used to be with the Commonwealth Bank - but I found
them to be totally inflexible. I'm happy with Wespac.
However I find that credit unions are even better.
Especially for term deposits. They offer much better
deals, and are even more flexible. And they don't have
the service charges that banks do.

If you believe in unfettered capitalism, then banks can do no wrong. Their only responsibility is to the bottom line and hence to their shareholders. Captains of business preach the line "Our responsibility is to our shareholders." and at the same time claiming their businesses are 'good corporate citizens'. This would be fine if the objectives of business were always in harmony with the objectives of society in general. With the erosion of government enterprise capitalists are placed in a commanding position to dictate terms to society. Although it is interesting that banks were not unwilling, during the recent GFC, to accept a government guarantee of their businesses. Public intrusion into private enterprise is acceptable when its serves the interest of business, well so it seems. If you accept the notion of unfettered capitalism, then you should accept the notion of unfettered labour, a totally free labour market, where those in a dominant position can demand pay and conditions to what ever level they can achieve. This would result in an unjust and very much disordered society, something akin to nineteenth century England. That we do not need, what we all have is a responsibility too work for social and economic justice for all.

Before sounding off, it might be useful to ponder exactly what we "want" from our Banks.

Any thoughts?

We give them money to look after, from our salaries or from our business activities. They lend money, and earn interest on it. They provide a convenient means by which to pay our bills (when was the last time you had to write out a cheque?)

What else do you want them to do? Which part are they doing badly?

And given their position in your super fund, exactly how "lean" would you like them to run? Would you perhaps prefer them to make a loss? If not, how much lower should their profits be... half what they are now? A quarter? How about break-even - would you feel comfortable trusting your hard-earned to an organization that was treading a financial knife-edge?

Slagging off is all very cathartic. But it also helpful sometimes if we sat back and considered what we situation would prefer to exist. We could then make our complaints more specific and directional.

My biggest gripe about banks is that their people appear to be caricatures, complete with the "computer says... no" mentality. And they employ far too many of them, which causes massive inefficiency.

G'day Pericles
Before sounding off, it might be useful to ponder exactly what we "want" from our Banks.

Any thoughts?

(1) The keys to their vault.
(2) A big cash hand out.
(3) A job at their Monte Carlo office with cash for the casino.
(4) Pay and conditions equal to the CEO.
(5) An all expenses paid world cruse every time you make a deposit.
(6) A $1,000,000 no interest loan and pay it back only if you want to.
(7) A Xmas present.
(8) Shout a round at the pub.
(9) An ATM that spits out money without a card.
(10) A bank employee to bring you breakfast in bed.

May as well ask for those things as you have as much chance of getting them as anything else you might think you deserve. LOL.

*My biggest gripe about banks is that their people appear to be caricatures, complete with the "computer says... no" mentality*

That is an interesting one, Pericles and I can understand it from
your perspective, being a man of integrity and honesty. But if
you look at history, it was for instance before the GFC, where the
risk management people were outvoted and the market share people
within the banks, pushed on with low doc loans and low equity loans.

Banks deal with all sorts of people and as you know in business,
plenty are hardly that honest. So we saw a rapid rise in bad loan
write offs, as banks got caught, despite the risk management.
That dramatically affected earnings.

So personally I would rather have a CEO who is a bit more cautious
with handing out loans, then one who wants to win market share and
takes too many risks. Instructing underlings to get that right, would
no doubt produce the frustrating situation that you describe, but
with 30'000- 40'000 people working for some of the large banks, if
they arn't cautious, those people could also get it very wrong, at
huge expense.

What I think we need in Australia is more venture capital, where
equity investors can take a stake in new ventures for a share
of the equity and risk. America is a long way ahead of us there.

Some interesting perspectives and discussion.

Paul1405 – you seem to despise the fact that a business can exist to make money. Actually, the only reason a business does exist is to make money; if it doesn’t, it ceases to exist. I agree that there is a need for minimum standards set by a regulatory authority (which represents the will of the people through the government system and legislation) to cover labour conditions and business conduct and we have these in place. And your humour aside, you seem to have some feeling of entitlement that bugs me. It reminds me of the old Monty Python sketch – what have the Romans ever done for us?

In line with Pericles’s post, I think the banks provide a service to a market and that market (us) can choose to participate (through deposits, loads, etc) or not. Presumably enough people want to use these services. Lexi has suggested alternatives (eg credit unions) that have different cost structures and borrowing regimes and those choices are certainly available, or you can always keep your money in a sock under the bed of your rented house.

I guess the other think that bugs me is the way that many people blame the banks (can also substitute government, local council, boss, partner) for their financial woes, lumbago, skin cancer and liver cirrhosis. This is peddled well in the popular media. When did people stop taking responsibility for their own lives? When did the famous Aussie “can do” attitude get replaced with a culture of blame and an expectation of undeserved entitlement together with the associated whining that we used to make fun of in others? And why?

Hi Pete,
In response to your assertions. You say "Paul1405 – you seem to despise the fact that a business can exist to make money." No not at all, it is only fair and reasonable that those that take a risk should be rewarded.
You say "Actually, the only reason a business does exist is to make money." Not at all, my son has a very successful business, which granted, could not exist in the long term if it did not make money, but my son also gets enjoyment from what he does. Take a doctor with a practice in a small town, could have an altruistic motive for conducting business there, and not in a big city where he could make more money. Some in business are not just driven by the profit motive, there are other reasons to be in business.
You say "you (Paul1405) seem to have some feeling of entitlement that bugs me." Firstly I'm deeply sorry that you are "bugged". No, quite the opposite, I have no expectation of any kind of entitlements from banks.
You say. "I agree that there is a need for minimum standards set by a regulatory authority (which represents the will of the people through the government system and legislation) to cover labour conditions and business conduct and we have these in place."
Then government will have to legislate from time to time, to impose the perceived will of the people, as government can never be quite sure what that will is at any given time, on business through regulatory authorities. Must agree with that.
p/s The Life of Brian a very funny movie.

I didn't have lending in mind when I had my whinge, Yabby. Just the sheer, unadulterated inefficiency that permeates the system.

Through my business, I have acquired what they call a "personal banker". This is a name on a business card, together with a phone number.

I have cause to ring maybe once, twice a year, max. When I do, it is usually some kind of problem that is holding me up, and I need the Bank to solve it.

So I ring the number. It rings out. There is no facility to leave a message. I look up the phone number of the Branch. There isn't one. There is a 13 number that is answered by a menu. None of the menu items allows me to talk to my personal banker. After a while, I get through to a human being. Can I speak to Joe Bloggs please. "I'll try his number..." no-o-o-o, don't do tha.. too late. It rings out. I call back. I negotiate the menu again. This time I'm quick enough to stop being put through, and explain that Joe is my personal banker, he isn't answering, is there someone else there who can help? "I'll try for you". Five minutes of hold music. "I'm sorry, who were you calling?" No, you were calling on my behalf... "oh, that was a different person, I'm just picking up a call that shows on my screen as having waited for five minutes... how can I help you?"

The last occasion that this happened was about three months ago. I eventually had to get out from behind my desk and go in person to the Branch, wasting half a day on top of the half a day I had already spent on the problem.

What I found was a) my "personal banker" had been promoted, and the new guy was... on an induction course.

Back in a week.

a) this is not an isolated incident

b) anecdotally, all banks are equally bad

Transactionally, banks represent good value. It's the unspeakably incompetent management that gets on my wick.

Sorry if I misinterpreted some of your comments Paul. BTW, I intend to give your list to my bank on Monday and see how it goes – no harm in trying.

But apart from the sanitation, medicine, education, wine, public order, irrigation, roads, fresh water system and public health, what have the Romans ever done for us?

I'm not sure whom you bank with Pericles, maybe its also different
in different parts of Australia. I'm with Westpac and I must say
that nearly all the time, they fix the problem when I ring. But
I did get hold of the direct number of my bank manager, although
its not in the book. She'll usually act pretty quickly so I
can't really complain. But for me the best thing is electronic
banking. Its made everything so much easier

Pete,
I am a believer in social justice and equality for all. I think the system we have in Australia, although far from perfect, is the best method to achieve this outcome. A mix of private enterprise (capital) with public enterprise and regulation (government) will giver a far better overall result than say a totally government dominated social, like existed in Stalinist Russia, when a small elite have total control and privilege whilst the majority become nothing more than slaves to the state. At the other extreme where Capitalism is paramount and the free market determines all outcomes and the state is only required to enforce the will of capital, something like National Socialism, again produces a privileged minority elite with the majority slaves to capital. In both extremes the State runs to excess in enforcing the will of the minority.
What we argue about in our society is not what 'system' to embrace, that has been well and truly established and will not change in the foreseeable future, but how government should operate within the system to achieve the best of outcomes. All sections of society have a responsibility to work to produce a desirable outcome for all of society. Neither business nor labour is immune from meeting their social responsibility.
Pete, what bugs me is to hear a CEO of a big corporation say "my only responsibility is to the share holders." bugs me as much as hearing the head of a big union saying "my only responsibility is to the members." Both are powerful and both are negating their social responsibility.

@ Pericles

Been there done that! Until a very good friend of mine gave me some very sound advice.

Become intimate with your banker and your solicitor, more so with your banker. Every business needs good ones of both and instant access to them. It's amazing what a 12 year old bottle of Jameson and a shout to a table top dancing club a few of times a year will do. Hey business is business and if you want the goods you have to be prepared to give a little to receive a lot :)

But on the subject of: Are Australian banks good or bad?
They're the same as all banks world wide. Low life snake oil salesmen, just ask one who tells the truth and he'll confirm it for you!