The Lucky Laundry by Nathan Lynch

Author:Nathan Lynch
Language: eng
Format: epub
Publisher: HarperCollins
Published: 2022-04-20T00:00:00+00:00

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What only a handful of people in Australia knew, at that stage, was the extent of the cosy and complex relationship between APRA and the country’s largest bank. Only those in the room with the Council of Financial Regulators in 2008, as they pulled together an emergency bailout of Bankwest, knew the full extent of the truth. The Commonwealth Bank had grown arrogant, dismissive and tone-deaf because it had good reason to do so: it had saved Bankwest, and with it saved Australia from the financial crisis that had ravaged the Northern Hemisphere.

The Commonwealth Bank had been acting like an addict, drunk on money and power. APRA knew it needed to stage a strategic intervention. But it needed to do so in a manner that addressed the prudential regulator’s own failings, and the fragility of the Australian banking system, which had become one of the most highly leveraged in the world. Australia’s households could only have become the second-most indebted on the planet — after Switzerland — with the support of an aggressive banking system and supine banking gamekeepers.

APRA had realised that CBA’s cultural failures were not just damaging the bank’s reputation. They were putting the entire financial sector’s standing at risk. APRA needed to force CBA’s management to look squarely in the mirror.

The best person to construct that mirror, APRA decided, was its own former chairman, John Laker. After all, he was there leading the prudential regulator when the financial crisis hit and the Bankwest bailout took place. Laker’s brief was to throw a metaphorical bucket of cold water over the board and senior executives at an institution that had become deaf to criticism. At the same time, he would also be conducting a delicate post-mortem on the extent of APRA’s own ‘regulatory capture’.

The report also needed to be honest and clear enough to resonate with the public. It needed to eschew ‘regulator speak’ in favour of language that ordinary Australians could understand and believe. Public confidence in the entire Australian financial system was at stake. This mission was so important that Laker decided he needed to write the report’s executive summary himself. From scratch. It was 1450 words, and every one of them needed to carry a punch. It may also have been a way for Laker to exorcise his own demons over the Bankwest crisis.

The report was due to be released on the morning of 1 May. At 4.35 pm on 30 April, Laker was still tinkering with the wording. His trusted lieutenant, Stuart Bingham, decided he needed to be prised away from his computer. ‘I went up to him and said, “John, it’s time. We’ve got to send it to them,”’ recalls Bingham, general manager of the Diversified Institutions Division at APRA. ‘He said, “Stop, everyone” and that was it. We were done.

‘We got the final report and we released it at 8 am the next day.

‘We had a lot of trepidation,’ Bingham acknowledges. ‘We didn’t know how the report was going to be received. We

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