Don’t expect any big scalps from the banking hearings

ANZ’s Shayne Elliott made slightly heavier weather of his appearance before the House of Representatives Economics Committee this morning than the Commonwealth’s Ian Narev did yesterday. But both illustrated why a parliamentary inquiry is a far inferior vehicle for banking accountability than a judicial inquiry.

There are two basic impediments to a parliamentary committee of any kind: time and research. All inquiries have a limited time period and all hearings are finite. Time also has to be allocated between different committee members; in estimates hearings, this means some incisive questioning from a non-government senator has to stop every ten or fifteen minutes so a government senator can waste time asking Dorothy Dixers.

Smart public servants know that you play for the clock in estimates, stringing out easy answers for as long as possible to chew up time, pretending to be deferential by giving senators long and detailed answers to “a very good question, senator”, knowing it reduces the time for more hostile questioning.

So the narrower the focus of an inquiry, the better. Conducting a general inquiry into banking behaviour means a vast array of issues — interest rate setting, credit card fees, treatment of whistleblowing, financial advice and specific scandals — can all be covered, and clearly some MPs, like chair David Coleman, felt obliged to try to cover most of them.

[How bank fat cats will avoid any sticky questions in this week’s grilling]

It was noteworthy that the most successful recent inquiry into the financial sector — the Senate economics inquiry into ASIC, chaired by Labor’s Mark Bishop — ended up focusing on two specific areas and, in particular, the staggering failings of ASIC in relation to the Commonwealth Bank’s financial planning arm. A royal commission, on the other hand, isn’t constrained by time, and can explore any issue in detail, devoting as much or as little time as the commissioner believes is needed.

Thus Narev and Elliott only really struggled when MPs were prepared to dwell on specific issues, rather than trying to cover off multiple angles of attack.

And committees don’t have the kind of research resources that royal commissions have. Committee secretariats can do a lot of the work for MPs, but royal commissions have masses of lawyers and researchers that can investigate issues before any witness appears before them. That’s why they cost so much money. Witnesses will fare much more poorly than Narev and Eilliot if their questioners can focus on specific issues for an extended period of time, and have an array of documentary material before them to use.

In the absence of time and research, bank executives have an easier time of it: offer a mea culpa for well-known failings up front (Elliott offered a stronger opening apology today than Narev), and then insist that many failings were the result of poor systems that were previously in place but which have now been overhauled.

[The corporate culture wars are wider than banking]

For more recent scandals, stress that the bank is continuing to examine them (best if you repeatedly note, as Narev did that, that you have independent people examining the scandals) and as much as you’d like to help the committee, you are reluctant to comment until those internal inquiries are complete. Nod vigorously at suggestions the banks examine more consumer-friendly products, even if you have no intention of touching, say, “tracker mortgages” with a 10-foot pole. Talk about how you always welcome competition, despite operating as a cartel. Earnestly discuss how important internal culture is and how you’re committed to improving that.

What’s interesting is how similar Narev sounded yesterday to ASIC when it appeared before Bishop’s committee. The same apologies for past mistakes, the same insistence that things were now improving (although, of course, acknowledging that it was a work in progress), the same earnest simulacrum of accountability and transparency.

ASIC’s senior executives found that act harder to get away with because Bishop, John Williams and Peter Whish-Wilson were well-prepared for the task of drilling down into specific incidences where the Commonwealth Bank’s planners had behaved outrageously and ASIC had failed to do anything. In the time available at these hearings, even the best prepared MP won’t have enough time to drill through the committee room table, let alone into the meat of individual scandals.

And ultimately the most important difference between these hearings and a royal commission is the outcome: at worst, some embarrassing headlines for bank executives, versus an independent, well-informed and credibly argued assessment of what elements of internal banking systems and culture led to inappropriate, unethical or illegal behaviour by banks. Because without that, there’ll simply be a future bank CEO sitting at the same table, offering the same warm fuzzies about how the systems of the past have been replaced and things will be much better from hereon.