Wrong Way by Damien Cahill

Author:Damien Cahill [Cahill, Damien]
Language: eng
Format: epub
Publisher: Schwartz Publishing Pty. Ltd
Published: 0101-01-01T00:00:00+00:00

Banking Culture Before and After

The Campbell Report declined to contemplate the importance of banking culture. Several facets of the pre-deregulation age are relevant. Banking employment was essentially a lifetime career, with senior management conventionally promoted internally. This fostered a workforce culture of procedural familiarity, company loyalty and integrity. There was considerable training. Lending criteria were strict and tightly controlled.

During the 1970s, discretion was offered to loan managers in the form of ‘delegated lending authorities’ (DLAs). DLAs facilitated abuse, especially borrower asset valuation manipulations. Following deregulation in the 1980s, DLA limits were increased dramatically, with instructions to managers to ‘lend, lend, lend.’ ‘Bottom line’ (i.e. profit) imperatives led to a disinclination to engage in the expense of training lending staff to properly gauge prospective borrower viability. Front-line staff were forced into status and remuneration structures that pressured them into expanding their loan books and cross-selling on any terms. This pressure has led to the practice of bank staff themselves filling in important detail in a loan application, and knowingly including inaccurate information (with or without the knowledge of the borrower). Signatures have even been forged. Initially, these practices were done to enhance the prospect of a loan application approval at a more senior level, but such approvals have now been systematised, as I shall discuss further. Banking culture went from being relatively incorruptible to a world in which corruption has become an integral dimension of banking practices.

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