The Australian Royal Banking Commission has ended its work with a whimper. Is it fair to say that bank regulators don't really know what to do with banks? Or does the responsibility lie further up the chain, with politicians? Well, of course it does. Will Australian politicians find the will to change Australia's cosy foursome? The Australian Royal Banking Commission is presenting the findings of more than a year's investigations into the banking industry. "There can be no doubt that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and those who managed and controlled those entities: their boards and senior management," said Commissioner Haynes. "Nothing that is said in this report should be understood as diminishing that responsibility."In a choreographed release of statements, banks are this morning issuing notes of regret, and promising to look carefully at the 76 recommendations by the Commission. But for all the promises of change, it looks very much like before. No individual charges have yet been laid against bankers.
However, Australia's competition authority will be feasting on the royal commission report. Although financial services is not its focus, the Australian Competition and Consumer Commission has a role to play in regulating the banks. Commission chair Rod Sims expects that competition will need to increase. "Market economies only work properly if you have competition and we have to make sure there is more in banking," Mr Sims told the Financial Times. "We have to fix the cosy oligopoly," he said of the Big Four. "They have to feel under threat." As wiser heads have observed, there is a chronic problem of oligopoly around banking, with four big banks in any given country typically working with the big four law firms and the big four accounting and auditing firms. A recent report by the Public Companies Accounting Oversight Board inspected KPMG, using a sample of audits from 2016. "The inspection procedures included reviews of portions of the Firm's work on 52 issuer audits, which generally related to issuer year ends in 2016. The inspection team identified matters that it considered to be deficiencies in the performance of the work it reviewed. In 26 audits, certain of these deficiencies were of such significance that it appeared to the inspection team that the Firm, at the time it issued its audit report, had not obtained sufficient appropriate audit evidence to support its opinion." If we're reading that correctly, half of the inspected audits performed by KMPG were not up to scratch.
So, Australian banks need more competition, as do auditing firms. But at least these firms do not gather thousands of pieces of information on your movements. Step forward, Google. Indeed, expect "surveillance capitalism" to become one of the key phrases of 2019. Yesterday's Sunday Business Post notes that the European Data Commissioner is questioning Google about "its practice of tracking the location of users through its popular Google Maps service". The piece notes a recent New York Times report on private smartphone apps that recorded people's movements up to 14,000 times (see story in links below), tracking travel, addresses of people being visited and more. One issue appears to be that even when people turn off location tracking, the settings can reset when users update apps. Google maintains that its use of data helps users of its app, such as Traffic, which offers users alternative routes to get past heavy commuter traffic. A Google spokesperson said "We do not sell this information to advertisers or anyone else. We do provide clear descriptions of these tools and robust controls so people can turn them on or off."
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