Malcolm Turnbull has just announced that the government will launch a Royal Commission into the banks after the four major banks penned a letter to Treasurer Scott Morrison asking him to establish a “properly constituted inquiry” into the financial services sector.
The surprising request acknowledges the banks’ previous objections to being put under the microscope claiming now that it’s in the “national interest for the political uncertainty to end”.
Industry experts have been arguing for some time now that there is a lack of confidence in our financial system, including in offshore markets, and this has diminished trust and respect for the sector and its people.
The letter to the Treasurer admitted previous mistakes:
“As you know, our banks have acknowledged that we have not always got it right, and have made mistakes. We now ask you and your government to act to ensure a properly constituted inquiry into the financial services sector is established to put an end to the uncertainty and restore trust, respect and confidence.”
The banks said that they wanted the inquiry to cover “the community’s concerns, which include banking, insurance, superannuation and non-ADI finance providers” and that they would ensure full co operation with the aim of strengthening Australia’s financial services system.
The Royal Commission will have the scope to explore the banks and other financial services entities, centering around alleged misconduct.
The inquiry will also consider the conduct of banks, insurers, financial services providers and superannuation funds (not including self-managed superannuation funds) and will also look at “how well equipped regulators are to identify and address misconduct”.
It will not inquire into other matters such as financial stability or the resilience of the banks.
The Prime Minister said that a Royal Commission was a “regrettable but necessary action” but was “in the national economic interest”.
He believes that “All Australians have the right to be treated honestly and fairly in their dealings with banking, superannuation and financial services providers. The highest standards of conduct are critical to the good governance and corporate culture of those providers.”
Many experts argue that Australia has one of the strongest and most stable banking, superannuation and financial services industries in the world. It performs a critical role in underpinning the Australian economy, which remained fairly strong during the global GFC and is internationally recognised.
It is hoped that a Royal Commission will only strengthen this reputation and not undermine it.