- Turnbull’s backflip
PM Malcolm Turnbull has long warded off calls for a royal commission into banking from the opposition party and more recently from pollies in his own camp. Last week, the PM finally reneged and announced a royal commission will take place next year to investigate misconduct in the financial services sector and restore public faith in the industry.
The PM has assured the public that it will be a “comprehensive inquiry”, not only covering off our banks but wealth managers, superannuation providers and insurance companies.
The powers of the royal commission are largely investigative and while it doesn’t have the power to order compensation for affected consumers, it can make recommendations to the government to consider changing the laws and regulations that govern the banking sector.
- How did this all come about?
Murmurings of a royal commission started when a Senate Committee first recommended it in response to CommBank’s financial planning scandal.
Since the financial crisis, the banks have been plagued by one scandal after another. More recently, CommBank has been defending off allegations of breaching anti-money laundering and terrorism-financing laws, while Westpac, ANZ and NAB have been caught up in an alleged rigging of the bank bill swap rate.
- Who is in charge?
Former High Court judge Kenneth Hayne has been appointed the task of heading up the $75 million royal commission.
- When is this happening?
The royal commission will begin early next year with a final report set to be delivered by February 2019. However, this is a stone’s throw from the original proposal for the inquiry, which was expected to last for several years.
- How will it affect everyday Australians?
The length of the inquiry is limited to just one year which begs the question of how much the investigators will be really able to dig into given the wide scope laid out for them by the PM.
The bank’s lending practices are likely to come under the commission’s microscope but we don’t expect to see any major changes due to the strong regulation in this field already.
Overall, we believe this royal commission will have positive outcomes for consumers. We expect the banks to try to generate as much positive coverage as they can throughout the course of the inquiry by improving product offerings to the benefit of their customers. We have already seen evidence of this recently through the scrapping of pesky ATM fees and the launch of new low rate cards.
While a fuller, more robust inquiry is likely to deliver better results, this royal commission is ultimately going to be a win for consumers.