Read the brief extract from Anthony Hughes’ article ‘Credit card profit soars but ANZ feels no guilt’ and answer the following questions (be specific about the theories you are using when providing your answers).

ANZ denied yesterday it was overcharging customers after reporting a 71 per cent increase in credit card profits. The bank also reported a 93 per cent profit rise from mortgages.

The overall net profit for the March half was $895 million, a record for the bank.

The result comes just a week after the bank unveiled a plan to tackle community concern about banking standards, including a new customer charter, fee-free over-the-counter banking for people over 65 and the appointment of a senior customer advocate.

ANZ’s chief executive, Mr John McFarlane, defended the credit card profits. ‘ These are not unfair businesses and we are not getting unusual levels of returns,’ he said.

Mr McFarlane admitted the banks had been slow to recognise the depth of community concern. ‘Whether we are going to be regulated or not we are going to have to do things differently.’

REQUIRED

1. Why do you think the bank ‘unveiled a plan to tackle community concerns’?

2. What do you think motivates the government to take action against the banks?

3. The bank’s reported profit seems to be an issue of concern. Do you think that community concern about the actions of the bank would be as  great if the bank was not so profitable?

4. Do you think that community concerns about the profits made by banks might motivate the banks to adopt accounting policies that reduce their reported profits? Explain your answer.