Finance sector ‘not to be trusted’

The former deputy governor of the Reserve Bank, John Phillips, said yesterday that financial institutions are “not to be trusted”, are not particularly ethical, tend to think of the money they control as their own and widely regarded as “rapacious”.

Mr Phillips presented these views in a speech entitled “Whose Money Is It Anyway?” at a lunch-time meeting of Australian Business Economists. He said that even though senior executives in the finance sector would dispute these claims, “that's the way the evidence points”.

Mr Phillips said the community expects a lot from its financial institutions in terms of service, integrity, transparency and prudence, but is not convinced that – left to its own devices – the financial sector would live up to those expectations. He said he is himself disappointed with the average standard of financial ethics and attitudes: we're forgetting the lessons of the 1980s too quickly for my liking, he said.

Although he cautioned against excessive regulation as a response he said confidence will only be restored if corporate governance practices conform with community ethical standards. The finance industry is more open to abuse than most other industries, he said, and there are many practices which although not strictly illegal are not “straight up”.