Now that the royal commission hearings into the banks and financial institutions have finished, people are asking whether things will change. There are grounds for both cautious hope and pessimism. Hope is based on the expectation that the exposure of greed, complacency and lassitude in institutions, boards and regulators will lead them to hunger for a better reputation.
The grounds for pessimism are the reappearance of the claim that the royal commission has hurt Australia by destroying trust in the financial system, the well-coached defensive strokes of those bank representatives who most recently appeared before it, and the fashionble criticism of 'virtue signalling'. This phrase implies that ethical behaviour is irrelevant to the real duty of banks to benefit their shareholders.
The questions these defensive moves raise are whether changes in behaviour will be more than cosmetic and short lived, and whether those responsible within and for financial institutions have accepted that there is a problem that needs fixing.
The appearance of Dr Ken Henry, the chair of the Commonwealth Bank and former governor of the Reserve Bank, at the commission sharpened this question. He was consistently terse and rebarbative in his answers to questions about bad behaviour, as if to ask, 'What else would you expect?'
In his response, however, he also mused with surprising impunity about larger questions, including the accountability of banks. He went beyond the dogma of sole accountability to shareholders to include customers, staff and, with a sense of daring, the national good.
This idea, standard in Catholic thinking, is inimical to the economic ideology of Treasury and economic commentators who see the public good secured by the contractual arrangements between individuals and businesses seeking profit in a free market. They have seen the imposition of ethical and cultural obligations that are not subject to statistical measurement as dangerous nonsense. Displays of compliance with these values is simply virtue signalling, equivalent to the flag waving at football matches by spectators who want to make their team look good. They have no effect.
This view ignores the reality that banks, like all human organisations, are networks of interlocking relationships that need to be harmonised if they are to work effectively. Organisations do things, and most produce things, but their reason for existence is not defined by what they produce or by the profit they make. Nor do they consist of disconnected individuals who work in isolation. A good bank is one in