Sunday Territorian

The ‘big end of town’ the only real winner as ACCC’s bank cartel case falls over

- Terry McCrann

Headlines screaming that our competitio­n czar’s “bank cartel case had collapsed” might give readers the very strong impression of two things: that our big banks are in a cosy cartel to rip off consumers, and that they’ve just been given a green light to keep doing that.

Both impression­s would be wrong, at least so far as this specific situation was concerned.

The rather strange case launched by the ACCC had zero to do with the way banks interact with their customers – providing loans at an interest rate on the one side, and raising deposits from them, these days mostly at no interest rate, on the other.

Indeed, if the ACCC had really wanted to protect bank customers from being ripped off by a “banking cartel”, maybe it should have launched a case against the banks and the Reserve Bank together for locking in those zero deposit rates right across the system.

The RBA basically mandated a 0.1 per cent rate tops for raising money across the financial system and even gave the banks a cool $188bn (effectivel­y of your money) at that rate.

You can make a lot of $500,000 home loans with that sort of money (376,000, to be exact) – all lent out at 2 per cent and rates higher, clearing a cool $3.76bn-plus a year – before rather minimal expenses of course, and all virtually risk-free.

These days, with everescala­ting property prices, a bank has to be very, very careless to lose money on a home loan.

Of course, I’m just joking. About such a cartel case. Everyone knows that the RBA and the banks have only been doing it for your own good.

Just like all those lockdowns we’ve all, for want of a better word, lived through over the past two years. Nothing to see here, move on.

No, this rather curious case, which has now collapsed after the spending of a few million dollars of your money, to keep a few dozen needy and deserving lawyers in the

lifestyles that befit them, was all about backroom dealing in and around an ANZ share issue.

Back in 2015, the ANZ moved to raise $3bn by issuing shares. Some $2.5bn was placed with the “big end of town” – institutio­nal investors. A further $500m was to be raised through what’s called a Share Purchase Plan to mum and dad (and SMSF) retail holders.

In the event, those small holders wanted more and the ANZ “generously” accommodat­ed them, by accepting every dollar offered, adding up to $720m.

The “top end of town” placement was underwritt­en. That meant a bunch of financial institutio­ns – but not including other big banks – guaranteed the money, even if the instos didn’t want to subscribe.

Well, a lot of them didn’t. The placement fell $800m short. That meant those underwrite­rs had to put up that money and they then held $800m “worth” of ANZ shares they didn’t really want and would move to sell into the market.

The trouble was, the “naughty bit”, was that they all kept it a secret. The ANZ simply announced it had raised the $2.5bn.

While the failure to disclose the truth was entirely “understand­able” – nobody wanted to tell the market that there was nearly $800m of ANZ ‘overhangin­g’ the market and likely depressing the share price – it was, well, very, to use that word again, “naughty”.

Indeed, I’d go further; it quite deliberate­ly misled the market. Retail holders went ahead deciding whether to subscribe, blithely believing that the “big end of town” had enthusiast­ically coughed up the full $2.5bn.

When the truth filtered out, the ACCC got all hairychest­ed and alleged “cartel”; and indeed a criminal cartel not a civil cartel at that.

That for one imposed a higher standard of proof obligation on the ACCC; which clearly the prosecutio­n hasn’t been able to get close to; and progressiv­ely, cases against specific defendants fell over and now it’s all collapsed.

Yes, everyone from the ANZ down should have been well and truly hauled over the regulatory coals, but alleging a “cartel’’ was a bizarre way to try to do that.

Yes, in a rather twisted “angels on the head of a pin”, way you could see it as a “cartel” to “manage” the selling of those unwanted shares, but that’s like saying your average crim is in a ‘cartel’ to deprive citizens of their goods.

The right regulator and the right law for “going the ANZ and the underwrite­rs” was the corporate cop ASIC and the Corporatio­ns Law.

The bigger problem, though, was that they were all supposedly following “establishe­d market practice”. And that’s the real, serious, and depressing issue.

Everything in the financial system is structured and allowed to function to make it ‘smoothly efficient for the “big end of town” – so supposed benefits can trickle down to you.

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 ?? ?? ACCC chairman Rod Sims. Picture: NCA NewsWire/Adam Yip
ACCC chairman Rod Sims. Picture: NCA NewsWire/Adam Yip

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