Money Finance News Bank compensation bills for scandals hit $355 million
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Bank compensation bills for scandals hit $355 million

Bank scandals.
Financial scandals have taken a big toll on Australians. Photo: Getty
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The bill for the big banks in recompensing clients over financial scandals is continuing to rise, with the ANZ last week ordered by regulator ASIC to boost by $6 million to $10.5 million its compensation to mistreated OnePath superannuation customers.

That news “is a shock but not a surprise” said Erin Turner, campaigns director with consumer group Choice, although “it shows another disappointing outcome”.

While the extra cash will be welcomed by wronged ANZ customers, it’s small beer compared to what the banks have had to pay all up. In recent years a series of scandals have seen the big banks hit with compensation bills of at least $355.4 million.

Most of that money came as a result of mistreatment by bank financial advisory arms which, among other things, involved forging client signatures to switch investment choices without permission. Banks also charged clients advisory fees without giving any financial advice.

The figures are staggering with ASIC demanding the banks pay back a total of $204.9 million and of that only $60.4 million has been paid to date. The banks still owe $144.2 million, plus an interest component which has not been detailed.

A spokesman for ASIC said the shortfall in payments is not the result of a time payment regime drawn up by the regulator.

It is the result of the fact that the banks are having to trawl through their records to find details of the customers concerned and how much money they are owed, which apparently takes time. Just how much time presumably depends on the banks.

The list provided does not include all the high-profile scandals of recent years. The cost to the CBA of the money laundering scandal involving 53,700 transactions breaching reporting laws is yet to be determined and there are other issues under investigation or legal challenge.

There are also bank-related issues like the $500 million collapse of Timbercorp and the $3 billion Storm Financial collapse where incentives and lax lending saw the life savings of thousands go up in smoke, often at the latter stages of life when recovery was impossible.

Where recompense is made it doesn’t necessarily fully compensate for losses. For example the CBA repaid Storm Financial investors around $140 million when estimates of losses by those who borrowed through CBA were far higher than that.

Naomi Halpern, an activist who suffered personal losses in the Timbercorp collapse, says often compensation arrangements are inadequate. ANZ was a significant lender to Timbercorp investors.

“They’re not even giving back all of what has been lost. There is no recompense for the trauma and suffering people go through, you only get a percentage of the loss,” she said.

Ms Halpern is working with the review of banking dispute resolution led by Professor Ian Ramsay. She said while the committee is consulting widely the banks to date have only agreed to a prospective scheme that will compensate for future wrongs.

“They’re not interested in a retrospective scheme,” she said.

To date CBA has been hit with the biggest bills for compensation following the banking scandals. Payments will total $245.8 million when its compensation over financial planning misbehaviour are completed.

The bank reported a record profit of $9.88 billion last week and its theoretical liability over the money laundering issue totals almost $1 trillion.

Any settlement is likely to be far lower than that but with ASIC now pledging to look at the actions of CBA directors over the issue, there looks like being considerable personal and financial angst experienced at the bank before the issue is laid to rest.

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