New insight into State Bank collapse

Dr Greg McCarthy with a copy of his new book, outside the "old" and current State Bank buildings.
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Tuesday, 6 August 2002

THE financial collapse of South Australia's State Bank in 1991 was primarily caused by the bank turning its back on its community-based roots rather than poor handling by the then Labor State Government, according to the most comprehensive book on the State Bank disaster ever written.

The new book, "Things Fall Apart - A History of the State Bank of South Australia", is the result of 10 years' work by lecturer in Politics at the University of Adelaide Dr Greg McCarthy.

Published by Australian Scholarly Publishing, the book will be launched this week in Adelaide.

Described as a "post-mortem" of the disaster, the book provides a greater understanding as to how and why the bank collapsed by delving into the bank's history, including the earliest days of the Savings Bank of South Australia and the State Bank of South Australia.

Both banks, established in the 1800s, had their roots firmly planted in community service and put profit making as a secondary objective, Dr McCarthy says.

"There was an old-style morality about the institutions. Following their merger, and with the changes in global culture and the deregulation of the banking market in the 1980s, the old model was jettisoned for one based on 'doing the deal'.

"At the time it wasn't much different to what everyone else was doing, it's just that many of the deals being made were doomed to failure. Almost overnight the bank had become a 'greed is good' bank, and it didn't have the backing or the know-how to make that work," Dr McCarthy says.

He says the blame for the $970 million collapse (later revised to $3.1 billion in nominal terms) landed unfairly on the shoulders of the Bannon State Government, when "much more responsibility lay at the feet of those people doing the day-to-day deals".

For "Things Fall Apart", Dr McCarthy was given exclusive access to the records of the old Savings and State banks of South Australia. The book also takes a detailed look at the Auditor-General's reports and the Royal Commission.

"Although these events happened a decade ago, it's clear that the lessons from the State Bank collapse have still not been learned," Dr McCarthy says.

"Had the bank been more aware of its own historical strengths and weaknesses, it may have been able to make the transition into the global environment much easier. The same can be said of other Australian companies and industries that today are trying too hard and too fast to make their mark."

The book will be launched at 6pm Thursday, August 8, at Imprints, 107 Hindley St, Adelaide.

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