A month ago, Banking Day
suggested that by raising their own lending rates by more than the RBA, the banks would "risk great damage to the industry's battered reputation with consumers".
Over the past week the outraged tone of tabloid newspaper and talkback radio commentary has fully justified that prediction and more. The CBA's 4 November decision to raise its variable home loan rates by 0.45 per cent, after the RBA's 0.25 per cent rise, has sent a wave of anti-bank sentiment crashing across the media landscape.
The 5 November front page of the Melbourne News Limited tabloid, the
Herald Sun, declared "War On Banks", and its lead paragraph explained that "homebuyers battling unfair interest rate rises could soon be able to walk out on their greedy banks".
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The Herald Sun and its Sydney stablemate the Daily Telegraph then ran
pictures of CBA CEO Ralph Norris's "$10 million island hideaway" in New Zealand. The Herald Sun reported that "having orchestrated this week's pilfering of his customers' savings, Sir Ralph remains at large, missing in action, and unaccountable to a public baying for blood". These sentences ran not as comment, but as news.
Meanwhile, the Nine Network's Today show had Prime Minister Julia Gillard appear to tell viewers that like her fellow Australians she was "angry" with the banks. By mid-morning, major media websites were running a new parody of the ANZ's "Barbara From BankWorld" ads produced by the advocacy group
GetUp. And a smiling Joe Hockey fronted the evening news broadcasts with his private members' bill to outlaw "price signalling".
Amidst this media tsunami, the banks and their representatives at the Australian Bankers Association have mostly continued to make the argument that rising dependence on pricey overseas funding makes above-RBA rises inevitable.
Westpac's Gail Kelly talked of "a structural shift in our cost of funding position" and called for "some cool heads and some quiet conversation". The ANZ's Mike Smith argued that bank margins on mortgages have fallen from 4.5 per cent less than 1.0 per cent since the mid-80s.
The ABA has been peppering the media with such arguments for several weeks. Yesterday's
release targeted six claims about bank competition. For instance, it rejected claims of inadequate mortgage competition by pointing to the Cannex website's listing of 111 lenders offering 508 mortgage products. It was cleverly assembled, and appeared almost nowhere. Instead, television networks ran pictures of dogs somehow connected with a new banking campaign from the consumer group Choice.
It's not that no-one is listening to the banking industry. It's worse than that. People are listening to the banking industry's arguments, even understanding them, and then canning the banks anyway.
The ABC's Richard Stubbs, a former comedian but no fool, opened his can-the-banks segment on Victorian radio by acknowledging that the banks' profits represented around a 1 per cent return on assets. Then he said, effectively, that it didn't matter - the banks' profits and their CEOs' pay-packets were too big. Then he played Twisted Sister's "We're Not Gonna Take It".
At the bank of public opinion, CBA and its fellows are flat out of credit.
Ralph Norris, Gail Kelly, Mike Smith and other banking industry leaders have seemed startled and annoyed to find out over the past two weeks just how sceptically the public regards them. The one obviously unsurprised industry figure is ABA CEO Steven Münchenberg, who accurately forecast the industry's looming fate in a
speech delivered back in September (and reproduced in full on the Banking Day website).
Münchenberg wants the industry to change its behaviour, embrace its critics and build its credibility, rather than merely yelling more loudly at an uncaring public. He argued in his speech that this was the hardest but most important step in salvaging an industry's reputation.
Münchenberg said then: "The poorer the reputation, the less influence the industry has over its political and regulatory environment." As the industry continues to be buffeted by the media and politics, more of the Big Four's decision-makers may realise what he was talking about.