The Fairfax Ipsos poll
of April 17 found 65% of the public supported a banking Royal Commission. Yet the Government (minus initially a few
backbenchers) vigorously opposes it, slamming it as “populist”, “reckless”, a
“distraction”, and a waste of money.
Furthermore the Government claims it would take too long and be likely
to erode public confidence in the finance system.
These Government
spokesmen – Turnbull, Morrison, Cormann and others – obviously cannot see that
the community is sick of the recurring finance sector scandals and has no
confidence in any current measures for making these powerful institutions
behave ethically – and indeed within the law.
Another oft-cited reason
for the Government’s rejection of a royal commission is that we already have “a
tough cop on the beat” in the form of the Australian Securities and Investments
Commission (ASIC). ASIC, they reiterate,
has both the power to investigate and to prosecute. They point out that while a Royal Commission
can investigate, it has no power to prosecute.
While the “tough cop’s” powers
may exist, it has not had any success in stemming the flow of finance sector
scandals. Indeed many of the revelations
of bad behaviour have not been as a result of ASIC investigations but the work
of whistleblowers and financial journalists. And it would seem that the fines
resulting from ASIC investigations have seemed more like “slaps on the wrist” for
bad behaviour rather than effective deterrents.
In addition the “tough
cop”, along with other government entities, has had its response capacity
limited by the very Government which claims ASIC has all that is needed to keep
the banks and other finance institutions in line. In the 2014 budget ASIC lost $120 million
over 5 years. This has obviously
affected its investigative capacity.
The increasing clamour
for a Royal Commission has worried the Government because of the proximity of
the election. Consequently Treasurer Morrison announced recently
a series of measures which he claims will solve the bank problem. These measures include at least $120 million
in extra funding, tougher penalties for wrong-doing, greater powers for ASIC
and an extra commissioner to focus on prosecuting crimes in the finance
sector. These changes will be financed
by the banks who will be hit with a levy of $121 million. The costs to the
banks are not, according to the Government, to be passed on to bank customers.
Morrison and the Government
are obviously hoping this response will undermine the appeal of Labor’s Royal
Commission commitment. Presumably the Government backbenchers who were supporting the need for a Royal
Commission are now satisfied but it’s doubtful that many in the broader
community – and particularly those who have been ripped off by the banks – will
be.
Those who want the kind
of extensive open inquiry that a Royal Commission can provide, have no confidence
in ASIC as a body to expose and deal with financial industry malpractice. This view was highlighted by a Senate
committee in 2014 which found ASIC to be “a timid, hesitant regulator, too
ready and willing to accept uncritically the word of the bank”. There is considerable doubt about whether these
latest measures will change that.
Furthermore, is ASIC to
investigate its own responses to the plethora of financial scandals? This is a
matter which certainly needs to be investigated to ensure that such inadequate
responses do not happen again. Conflict
of interest issues mean ASIC cannot be given this important task. There is, of course, a question about whether
the Government wants a light shone on ASIC’s performance just as there is a
question about what appears to be its cosy relationship with the banking/finance
industry.
This close relationship
has been seen as a major reason for the reluctance of the Abbott/Turnbull Government
to take effective action to protect consumers.
A prime example of this was its desire to wind back the Future of
Financial Advice reforms legislated by the previous Labor Government. These reforms had been introduced to protect
customers from unscrupulous behaviour by advisers and their employers. The Government failed to wind them back only because
of Senate opposition. Another more
recent example of this close relationship is the funding the National Australia
Bank is providing as a co-sponsor for a political fundraising breakfast for
Kelly O’Dwyer, member for Higgins and the Assistant Treasurer.
The sense of entitlement
that banks have about being able to operate with as little government
interference as possible – even when behaving badly – was clearly obvious early
this month after Labor announced that, if elected, it would hold a banking
Royal Commission. The head of the
banking industry lobby, the Australian Bankers Association, refused to rule out
the possibility of a mining-style tax ad campaign against Labor. Presumably the widespread community support
for a Royal Commission revealed in a recent poll might make this lobby group
realize that such a campaign could backfire.
What is very obvious is
that there is a need to shine a very strong light on the banking/ finance
industry in order to force the changes that are required to make it fairer and
more responsive to customer needs.
Moreover there is an ongoing need to ensure proper compensation for consumers
who have been hurt by unscrupulous behaviour over recent years. And the “bad apples” in the sector need to be
identified and removed. This would lead
to a marked improvement in public confidence in the banking/finance
system. The Government measures are
clearly too little, too late and were merely rolled out because of fear of an
electoral backlash rather than because of any conviction that action was
needed.
The Royal Commission
into Institutional Responses to Child Sexual Abuse has shown how powerful is
the shining of a strong, very public light on institutions which have done the
wrong thing. We need a Royal Commission
into the banking/finance industry to force a sweeping clean-up in this sector.
Hildegard
Northern
Rivers
GuestSpeak is a feature of North Coast Voices allowing Northern Rivers residents to make satirical or serious comment on issues that concern them. Posts of 250-300 words or less can be submitted to ncvguestspeak AT gmail.com.au for consideration. Longer posts will be considered on topical subjects.