Financial services royal commission takes Australia by surprise

The surprise announcement of a controversial royal commission into the Australia’s banking and finance sector caught the country unawares, causing a drop in the value of the domestic share market on the Australian Stock Exchange.

Prime minister Malcolm Turnbull, pictured left, who has been resisting calls for such a move for more than a year, said that the enquiry would help to restore confidence and stability and “ensure our financial system is working efficiently and effectively”.

It comes in the light of scandals that have dogged Australian banks in recent years.

In August, as reported by International Investment, the Australian regulator announced an investigation into governance at Commonwealth Bank amid money-laundering allegations.

And in October 2016, again as reported by International Investment, the same bank paid a fine of A$105m following a damning report by another regulator that found the bank was charging for ongoing financial advice that it had not been giving to clients.

What appears to have forced Turnbull’s hand and caused his apparent change of heart was a letter co-signed by Australia’s four leading banks and sent to his office yesterday.

For their part, the banks – who have resisted such an enquiry in the past – are likely to have been converted to the cause in the knowledge that enough ruling National Party senators are prepared to cross the floor to vote for the commission as proposed by Liberal Party senator Barry O’Sullivan.

In the letter, the banks said that it was in the “national interest for the political uncertainty to end”, adding that it was “hurting confidence in our system”, including “offshore markets”, and that it had “diminished trust and respect for our sector and our people”.

A spokesperson for Turnbull said that the “ongoing speculation and fear-mongering” about a banking inquiry or royal commission was “disruptive”, adding that that it risked undermining the reputation of Australia’s “world-class financial system”.

The royal commission would, the spokesperson said, “further ensure our financial system is working efficiently and effectively” and would take as its remit the conduct of “banks, insurers, financial services providers and superannuation funds (not including self-managed superannuation funds)”.

I was limited to conduct and how effective the regulators were in policing the industry but would not look into other matters “such as financial stability or the resilience of our banks”.

“This will be a sensible, efficient and focused inquiry into misconduct and practices falling below community standards and expectations,” the spokesperson said.

“Most Australians are consumers of banking and financial services, and we all have the right to be treated honestly and fairly by banking and financial services providers.

“Trust in a well-functioning banking and financial services industry promotes financial system stability, growth, efficiency and innovation over the long term.”

 

ABOUT THE AUTHOR
Eugene Costello
Eugene Costello has been a journalist for some 20 years, and has written for a wide variety of UK and international newspapers and magazines.

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