Royal commissions won't tell you more about our banks than Shakespeare

My first contact with banks was at primary school when the local State Bank teller signed us kids up with a passbook account - and it was a real book.

Each week we would line up outside classroom 1b to deposit a penny or two. Investing a Zac or a Tray was big deal and relied on an earlier visit from the tooth fairy or some good luck with the Christmas pudding.

Then in secondary school I got a different view of banks when studying Shakespeare's Merchant of Venice.

The words of money lender Shylock still send a shiver down my hip pocket. "A pound of man's flesh taken from a man is not so estimable, profitable neither, as flesh of muttons, beefs or goats I say."

I'm not sure that the recently announced royal commission will shed any more light on the workings of banks than the Bard did. Or Bob Hope for that matter, who quipped "they'll only lend you money if you can prove you don't need it."

I'm not even sure we should be calling it a "royal" commission. I have always been led to believe that our royals are above carrying the filthy lucre on their person. It's all stacked up at the elite private bank Coutts, which had its own money laundering scandal about five years ago.

Banks are just banks, always have been, and no one should be surprised.

Although I was greatly surprised once by Tasmanian banking practices.

Back in the early 80's I flew to Launceston to meet the king of Northern Tasmania, Edmund Rouse, who owned, amongst many things, a few radio stations I was placing advertising with.

Edmund picked me up in a brand new BMW 7 series, the only one in Tassie at the time.

As we swept through the centre of town at alarming speeds, Edmund told me that eight months earlier he had lost his licence for a year. "What for?" says Louise. No surprises there. Speeding.

I knew he was a man of influence, but a whole new picture was emerging.

As we were going down the main drag, his senior executive David McQuestin leaned over from the back seat, and reminded Edmund that he needed to pop into the bank.

Funny I thought. It's Sunday night.

The big Beemer wheeled around and stopped outside The Bank of Launceston. David jumped out, pulled a key out of his pocket and went inside.

I thought it was 1927 and the city was Chicago.

A couple of minutes later, the lights went out again and David emerged and jumped back into the idling long wheel base limo.

This is not exactly what most people mean by an open door policy but it worked for Edmund very well until he did one withdrawal too many and was convicted of bribing a member of parliament. His was a case of when one door opens another closes behind you for three years.

A former chairman of one of our major banks recently told me that half of every board meeting is concerned with regulatory controls and doing the right thing. I believe him.

We have bigger problems in Australia than overpaid bank executives and the few who misbehave. Malpractice occurs in every industry and we have the laws and agencies to deal with it.

My greater fear is lending practices. As I understand it, Australian banks now have close to 60 per cent of their business in lending on domestic real estate, most of which is in housing - and many commentators say it is overvalued.

The equivalent figure in Europe is around 40 per cent, and in the US it's 30 per cent. It won't take much for a tumble in house prices to put the banks and their customers under serious pressure.

Back in 2007 I realised that the economy was overheated. I got a call from Bob Edgar, number 2 at the ANZ. He said that the new generation of bankers had never been through a downturn and that loans were getting out of hand.

A day or two later I bumped into business commentator Alan Kohler, who said that he was worried about American savings and loans getting too high and debt instruments called CDOs were out of control.

I put the two comments together and we got ourselves ready for a downturn which came along in spectacular fashion in October 2008.

We weathered that difficult time and I am grateful for the heads-up from a bank official and a canny journalist, but the lesson is that, in the first instance, we all need to take responsibility ourselves for our financial affairs.

We need to recognise that competition is the strongest instrument for keeping people honest, not royal commissions.

This royal commission is a waste of time and money. But of course it's popular.

This story Royal commissions won't tell you more about our banks than Shakespeare first appeared on The Sydney Morning Herald.