Australia’s big banks wander deeper into regulatory quagmire
Australian banks famously rode out the 2008 financial crisis with barely a scratch, but no longer are they the exemplar of success, as a commodity rout ravages the economy and a growing storm of accusations over misconduct threatens to tar their name.
Last week, Westpac Banking Corp (WBC.AX) became the second Australian lender after ANZ Banking Group (ANZ.AX) to be dragged to court by regulators over suspected rigging of benchmark interest rates. Both have denied any wrongdoing, saying they would vigorously defend themselves.
While increased regulatory scrutiny will eventually promote greater compliance, banks could face medium-term financial penalties, denting earnings and shareholder returns in a sector battling stricter capital rules and higher loan losses.
The industry has already been unsettled by probes into wealth mismanagement and insurance scams, and public pressure is piling on Prime Minister Malcolm Turnbull to order a sector-wide inquiry into bank conduct as he campaigns for a federal election in July.
In a speech at Westpac’s 199th birthday lunch last week, Turnbull accused banks of sometimes taking advantage of customers but stopped short of seeking a high-level inquiry. In contrast, Australia’s main opposition Labour Party on Friday promised a Royal Commission into the financial sector if it wins July’s election.
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