CBA boss Ian Narev

CBA boss Ian Narev

The heads of our big four banks start what will become an annual charade tomorrow when they front a parliamentary committee as a form of “punishment” devised by the Turnbull government to avoid the royal commission demanded by the ALP, the Greens and some crossbenchers.

Each bank CEO will have three hours before the committee, starting with CBA’s Ian Narev on Tuesday afternoon, ANZ’s Shayne Elliott Wednesday and Westpac’s Brian Hartzer and NAB’s Andrew Thorburn on Thursday. Just what this three days of questioning will find out is hard to see. It’s all a question of silence and timing.

Three of the four — Messrs Elliott, Hartzer and Thorburn — can’t really discuss very much because their banks ruled off their 2015-16 balance dates on September 30 and are therefore prohibited from speaking about operational and associated issues until the profits are released at the end of this month or in early November. And if the bank bosses said something considered to be market sensitive, they would be in trouble with the ASX and ASIC under the continuous disclosure rules.

The fourth CEO, Ian Narev, can talk because his bank balanced on June 30 — although the AGM isn’t until November 9 (when the first quarter trading update will be issued), and shareholders deserve to hear his thoughts first.

No doubt there will be a lot of questions about some of the financial advice scandals. But the bankers will easily repel those by pointing to the investigations, reviews and redress systems in place. Late and other fees will no doubt get an outing (even though the High Court knocked that one on the head). Those charges from ASIC with their claims of trying to rig the bank bill swap rate market against three of the four (ANZ, Westpac and NAB) will also be easily deflected by the claim of sub judice. There is also the poor treatment of insurance customers, conflicts of interest and the treatment of whistleblowers.

[Yes the banks are bastards — but …]

The Australian Bankers Association attempted to pre-empt some of the questions at the hearing with last week’s announcement of “an independent review of pay structures that put staff incentives ahead of customer needs and enhanced protections for whistleblowers”. The ABA said customers could feel better prepared to take on the “might of a bank when something goes wrong”. Whatever that means.

But while the stories on poor treatment of customers by the banks (Remember Storm Financial back in the wake of the GFC and the way its customers were poorly treated?), there are broader questions that need being asked of the banks.

There is a looming problem in 2017-18 when the new payments platform is put in place by the Reserve Bank that will allow customers of the banks (and the banks themselves) to get instant value for all payments. That will eliminate the three-day or longer settlement rort the banks run for cheques, transfers and other customer payments, meaning the banks won’t have free use of your money. It will add to their cost of funding by removing this small but valuable period of free money. Will banks attempt to force customers to pay for this “privilege”?

Will anyone on the committee have the background or the wit to ask the bankers about these issues, or the “too big to fail” concept? All four banks are systemically important to the Australian economy, so regulators say they should hold more capital and have bigger buffers and tougher prudential oversight. They are moaning and groaning about this, but seeing as Australian taxpayers bailed them out in the GFC through the deposit and debt guarantees (the latter allowing the banks to use Australia’s AAA credit rating for several years, for a fee), the too big to fail idea still has legs eight years later as the banks are even a greater part of the ASX.

In late 2008, the Reserve Bank funded the banks and the whole economy for more than a month via repos of high-quality securities and home mortgages that replaced the money the banks usually borrow from offshore. So in effect the banks were bailed out three ways by the Australian taxpayer. All banks, especially the big four, have consistently downplayed this support, and at times their view says they see the taxpayer support as an entitlement and nothing less.

The nervousness last week about the fate of the shrunken German giant Deutsche Bank told us those fears about bank stability are still there. Deutsche Bank has trillions of dollars of financial derivatives on its books and if it were to collapse or need bailing out, financial markets around the world would freeze and the RBA would be needed to support the financial system. No doubt banks would ask for debt guarantees. The RBA does have a back-up system in place called the CLF, or Committed Liquidity Facility, which the banks have been paying for (to the tune of hundreds of millions of dollars a year), and deposit guarantees remain in place.