Key Ethical Issues Faced by the Big Four Banks of Australia

Running head: Comparative business ethics & social responsibility

Comparative business ethics & social responsibility 1
“How Misbehaving Australian Banks Are Causing Global Pain “
Key Ethical Issues faced by the Big Four banks of Australia
The four largest banks of Australia viz. National Australian Bank Limited, Australia and New
Zealand Banking Group Limited, Westpac Banking Corp. and Commonwealth Bank of Australia
are facing a series of corporate issues in the recent times. So, the news article “How Misbehaving
Australian Banks Are Causing Global Pain “is focused on the accusations on these banks for
giving misleading advices relating to the financial decisions to the clients and manipulating the
standardized interest rates. The banks were blamed to be extracting fees from their clients to
increase their profits and to pay the remunerations to their executives (Cadman, 2018).
So in this essay the various ethical issues confronted by these banks and the ethical decisions
made in this behalf shall be assessed. Furthermore, the applicability and relevancy of the various
ethical theories to the issue will be justified below.
The Commonwealth Bank was being alleged for breaching the anti-money laundering
regulations thereby resulting in enquiry initiated by the Royal Commission .The lawyers were
investigating the series of consumer case studies to consider the instances which led to
misconduct and unethical behavior (Mikołajczak, 2017).
It was discovered that the National Australia Bank was accepting bribes to facilitate mortgages
which were based on false documents and it also charged fees from the consumers for advising
them on financial matters which they did not receive. The Westpac financial planners gave such
misleading advice that one nurse lost her house. Moreover, AMP, the company which dealt in
wealth management misled the Australian Securities and Investment Commission.
As a result, the government of Australia imposed severe penalties for the wrongdoing and
enhanced the power of Australian Securities and Investment Commission which can result in
selling off the advice business of banks .The Chief Executive, Chairman and three board
members of the 169 years old AMP have resigned post this decision of the government. To add
on the misery, these all were supported by the sluggish stock market, increased competition and
higher costs (Cull and Melville, 2017).

Comparative business ethics & social responsibility 2

Comparative business ethics & social responsibility 3
ANZ confessed in 2017 that two of its managers were accused to be conspiring with third parties
to make fraudulent loans. It was found that the frontline staff was engaged in inappropriate
practices in order to increase the incentives. The consumers were sold unsuitable products and
some of which comprised of SME lending. It led to the authorities investigate about the
marketing strategies of the bank.
Commonwealth Bank of Australia was alleged for deliberately defaulting the loans of consumers
after it bought the lender from the failed British Bank HBOS. The consumers of Bankwest
accused CBA for defaulting their loans in the years 2009 and 2010 for its own financial interest.
After the investigation, it was found that it gratuitously defaulted some of the loans so that it can
adjust the amount of default from HBOS under the price adjustment method as mentioned in the
sale contract agreed upon between the two banks (The Guardian ,2018).
As a result the investigations have been initiated by the Banking Royal Commission and it has
focused on lending to small businesses as most of them have claimed that they had lost money in
the ventures because of the acts of the banks.
The key ethical issues raised in the article are the violation of ‘Corporate Sustainability
Framework’ .It had claimed in its Corporate Sustainability Report of 2016 that sustainable
growth, fair and accountable banking systems and social and economic participation are the core
principles of Corporate Sustainability. On the contrary, the bank granted a loan of $220,000 to a
couple in the year 2014 to establish the New Zealand based gelato chain outlet in
Australia .The proposal was based on fake financial forecasts and clip art ice cream pictures.
As expected, the business failed and the ombudsman awarded the decree that ANZ should not
have approved the loan. Many mistakes were found in the data entry of the bank and they were
relied upon by the stakeholders at that time. So, it had violated the Fair and Accountable Banking
principle of Corporate Sustainability framework (ANZ, 2016).
Another ethical issue had arisen when Westpac had made a claim against an elderly pensioner
who was suffering from multiple health disorders. In spite of her poor health, she was allowed to
be a guarantor for the loan taken by her daughter which was worth of $165,000, for her business.
The business failed and the bank claimed the property of the pensioner. Upon investigation, it