Is Bill Shorten a populist with a thought bubble, or is Malcolm Turnbull shooting from the hip and attempting to defend the indefensible?
Last year in June Labor voted with the government to kill a Greens motion for a royal commission into misconduct in the banking and financial services industry. As Adele Ferguson said in the AFR, then came NAB, IOOF, CommInsure, allegations of bank bill swap rate rigging and a multitude of smaller scandals.
Labor announced last Friday that in government it would set up a royal commission.
The government claims a RC would damage the reputation of the banks, but Ferguson says it couldn’t get any worse. In fact as the AFR reported earlier:
- Global credit rating agencies are on alert about the rising cost of conduct breaches at Australia’s banks.
Interest-rate manipulation, claims payments problems in life insurance and poor financial advice in wealth management businesses prompted Fitch Ratings to highlight the “increased regulatory scrutiny on conduct and culture” facing Australia’s banks.
I’d tend to agree with ACTU secretary Dave Oliver who said the banking and financial sector:
- “has lurched from scandal to scandal, eroding public confidence in what should be the foundation of all economic activity in this country.
“There is mounting evidence of systemic corruption, poor governance and a lack of accountability” in the sector. “A royal commission would get to the bottom of those issues and renew trust,” Oliver said.
Turnbull says it’s a thought bubble and Labor has no idea what the RC would cover. Actually as Michelle Grattan reports, Labor has an outline. Chris Bowen said the royal commission would look at:
- how widespread instances of illegal and unethical behaviour were in the industry;
- how the financial services industry institutions understood and gave effect to their duty of care to consumers;
- how the culture, ethical standards and business structures of Australia’s financial institutions affected the behaviour of their employees and their operation in financial markets;
- whether Australia’s regulators were well equipped the identify and prevent illegal and unethical behaviour in the sector, compared with experiences overseas; and
- any other issues that came to light during the inquiry.
Detailed terms of reference would be drawn up in government. The inquiry had been costed at A$53 million over two years, Bowen said.
The inquiry would cover banks, insurance providers, and superannuation funds, but Bowen made it clear it would not be an inquiry into broader corporate Australia.
Scott Morrison and Turnbull have been saying that we already have a “tough cop on the beat”. Bernard Keane at Crikey (paywalled) asks how can ASIC police the banks when it has been gutted? Labor already fiddled at the edges, but in the 2014 budget Hockey cut $120 million over five years, and 14% of its staff. Between now and 2018-19, ASIC faces a further 9% funding cut compared to if its funding had been held steady in real terms.
An effect of this is that ASIC says they can no longer undertake the proactive surveillance that they did previously. They increasingly rely on the public to tell them where the problems are.
One benefit of a royal commission is that it can review the role and resourcing of the regulators, and issues like vertical integration in financial institutions, where banks own financial planners.
The claim is that only a royal commission can restore public trust and change the toxic culture.
Last year Nationals senator John Williams voted with the Greens.
Now there’s a growing bunch of dissenters within:
- Nationals MPs John Williams and George Christensen are strongly backing the calls for a royal commission, while their colleagues Luke Hartsuyker and Ken O’Dowd have signalled they are open to the idea.
Mr Hartsuyker, who was dumped from the frontbench in the latest ministerial reshuffle, told Fairfax it was “definitely something that should be considered”.
Mr O’Dowd said he was “open to the idea” but wanted to see more evidence to show whether it was needed. He said he was worried about the potential for an inquiry to damage the reputation of the nation’s biggest banks overseas.
Another Government MP, Liberal backbencher Warren Entsch, is also in favour of the probe, arguing it is critically needed.
Now Philip Ruddoch has released a statement saying: “The banking industry has serious issues it needs to address if it wants to avoid a royal commission”. His intervention is particularly significant because he sits on a joint parliamentary committee which is due to report on investigations into corporations and financial services.
So who has misjudged on this issue, Shorten or Turnbull?