By Elisha Hammond
Over the past few weeks, there’s been a lot of chatter about an upcoming royal commission into the Big Four Banks. But there’s been a lot less talk about what this actually is, what it will result in, and how we ended up here in the first place.
Simply put, a royal commission is a big government inquiry; it’s made by parliament and normally headed by a senior judge or court official, usually someone in the public eye.
Royal commissions are generally used to investigate wrongdoing on large scales or look at anything that interferes with the “peace, order and good government of the Commonwealth.”
In fact, a royal commission into the Big Four Australian Banks (that’s the Commonwealth Bank of Australia, Westpac, ANZ and NAB) has been on the cards for a few years now, but only recently have we seen real action on the issue.
So, to figure out why we are having this royal commission now, we have to go back to 2014 where a Senate inquiry blew the banking sector wide open.
This inquiry was made to look at the financial planning sector of the Commonwealth bank, a branch that had been accused of making a lot of stuff-ups when they were supposed to be looking after their customers.
Some of these blues include making fraudulent papers and putting their client’s money in risky investments without letting them know, all the while making loads more money from cushy commission rates. It also shone a spotlight on Westpac, ANZ and NAB, because if one bank is acting up, the same questions have to be asked of the other three.
Shouldn’t someone already be looking out for this kind of thing, you ask? For sure. Problem is, that body, called the Australia Securities and Investments Commission (ASIC) wasn’t really doing its job.
The inquiry found that whistleblowers who came forward and told ASIC about what was going on at Commonwealth weren’t treated seriously.
The watchdog was a lot tamer than it should have been, but has since used the inquiry findings to change up its security model and the way they investigate fishy business in the financial sector.
But mere changes to ASIC didn’t cut the mustard for the Labor party, who began calling for a more powerful inquiry, a royal commission, to discover the extent of the bank’s bad behaviour.
Fast forward to November of this year, where arguments about the creation of a royal commission were still happening. The government had refused to form one time and time again, arguing that ASIC was a strong enough policing body, able to keep an eye on the bank’s activity.
By this stage, it wasn’t just Labor calling for a commission; Nationals senators like Barry O’Sullivan joined the war cry, armed with a bill to force the Government to create one. With some of their own party members threatening to cross the floor and support the bill, the Liberal party began to sweat – but a letter from the Big Four Banks proved to be the final straw.
“Our banks have consistently argued the view that further inquiries into the sector, including a Royal Commission, are unwarranted,” Chairmen and Chief Executive Officers of the banks wrote to Treasurer Scott Morrison.
“However, it is now in the national interest for the political uncertainty to end. It is hurting confidence in our financial services system, including in offshore markets, and has diminished trust and respect for our sector and people. It also risks undermining the critical perception that our banks are unquestionably strong.”
So finally, surrounded by pleas from the opposition, his own coalition government, and now the banks themselves, Prime Minister Malcolm Turnbull seceded and agreed to form a royal commission into the financial services sector.
Leaving it this late means the banks have more control over the commission’s scope, outlining in their letter which branches should be investigated and which should be left alone considering previous inquiries.
The investigation will be headed up by former High Court Judge Kenneth Hayne, and is expected to cost taxpayers at least 75 million dollars over its 12-month duration.
What happens next is anyone’s guess, and mainly hinges on how bad the banks have been. If the commission discovers more dodgy behaviour then public faith in the banks will drop, harming our economy even more.
All we can do now is cross our fingers and toes and hope that recent findings aren’t just the tip of the iceberg.