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Banking with its tax avoidance schemes, off shore tax havens, and money laundering is very close to organised crime, says Evan Jones. Corruption in banking Corruption in the Australian financial sector is not an aberration but an integral dimension of its modus operandi. Three factors lie behind banking’s criminal tendencies. First, there is the special character of banking. Credit is an indispensible facility, so an essential public service is being delivered by companies with private motives. Moreover, the lender-borrower relationship is asymmetric. On home mortgages, the lender readily engages in predatory lending, capturing unsuitable borrowers, in addition fabricating figures and falsifying documents. Regarding small business or farmer borrowers, the relationship is profoundly
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Banking with its tax avoidance schemes, off shore tax havens, and money laundering is very close to organised crime, says Evan Jones.Banking with its tax avoidance schemes, off shore tax havens, and money laundering is very close to organised crime, says Evan Jones. Corruption in banking Corruption in the Australian financial sector is not an aberration but an integral dimension of its modus operandi. Three factors lie behind banking’s criminal tendencies. First, there is the special character of banking. Credit is an indispensible facility, so an essential public service is being delivered by companies with private motives. Moreover, the lender-borrower relationship is asymmetric. On home mortgages, the lender readily engages in predatory lending, capturing unsuitable borrowers, in addition fabricating figures and falsifying documents. Regarding small business or farmer borrowers, the relationship is profoundly
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Corruption in banking
Corruption in the Australian financial sector is not an aberration but an integral dimension of its modus operandi. Three factors lie behind banking’s criminal tendencies.
First, there is the special character of banking. Credit is an indispensible facility, so an essential public service is being delivered by companies with private motives. Moreover, the lender-borrower relationship is asymmetric. On home mortgages, the lender readily engages in predatory lending, capturing unsuitable borrowers, in addition fabricating figures and falsifying documents.
Regarding small business or farmer borrowers, the relationship is profoundly asymmetric. The lender takes customer assets as security over any loan. The lender will perennially induce the business borrowers to include the family home (and possibly that of the parents) as bank security.
The bank can default the business/farmer borrower at will, with a variety of mechanisms at its disposal. The defaulted business borrower is subsequently left without the business and homeless, forced onto public welfare. This practice is not incidental but pre-planned and pervasive.
In short, a banking licence is the perfect vehicle to both install and legitimate a criminal racket.
Second, inbuilt banking corruption has been facilitated by comprehensive deregulation (including privatisation) of the sector, following the 1981 Campbell report. A previous culture that kept malpractice under control was being dismantled in the 1970s and the process sped up with deregulation. Admittedly, internationalisation of finance and externalisation of workforce hire were inevitable, but no thought was given to the reconstruction of a culture of competence and integrity. Corruption set in from day one of deregulation, not least with the flogging of foreign currency loans to unsuspecting small business people and farmers.
Third, the corporation per se is a natural vehicle for corrupt practices, of which more below.
Progress in Political Economy