PM announces $75m royal commission into banking sector
A royal commission into Australia's banking sector will be launched after the Big Four themselves called for "properly constituted inquiry".
Prime Minister Malcolm Turnbull announced the $75 million inquiry this morning saying speculation about the commission was moving into "dangerous territory" that was putting the banking sector and the Australian economy at risk.
"The speculation about an inquiry cannot go on," Prime Minister Turnbull told reporters in Canberra.
"It's moving into dangerous territory where some of the proposals being put forward have the potential, seriously, to damage some of our most important institutions.
"We have got to stop the banks and our financial services sector being used as a political football.
"It may be politically advantageous for some people to do so.
"But it runs the risk of putting vital economic interests at stake and runs the risk of putting them under threat."
Mr Turnbull has given the Royal Commission 12 months to report back to government.
"This should not be a commission that runs forever, costing many hundreds of millions of dollars, as would've been the case under some of the proposals," he said.
"The terms of reference will ensure a responsible but comprehensive investigation into how financial institutions have dealt with cases of misconduct in the past, and whether those examples expose issues in terms of the cultural and governance issues in terms of the regulation and supervision of the industry.
"It will cover the nation's banks, big and small, wealth managers, superannuation providers, insurance companies.
"It will be a comprehensive inquiry."
Mr Turnbull made the decision after meeting with Cabinet this morning.
After receiving the letter from the Big Four banks asking the government to step in, the leadership team determined the only way the government could give "all Australians a greater degree of assurance" was a royal commission into misconduct into the financial services industry.
The Commission will report back by February 1, 2019.
The Royal Commission will not test individual cases of Australians who had fallen victim to bank misconduct.
"I want to make this very clear, a royal commission will not be able to recommend comprehension for individual cases, but it will be able to make recommendations the government consider in the interests of making our financial system the most competitive, transparent and accountability in the world," Mr Turnbull said.
"We have much to be proud of about our banking system and the experience of the Global Financial Crisis should remind us of that.
"We have much to be proud of, but also much to take care of.
"We need to maintain the stability of our banking and financial system, all Australians, consumers, small businesses, farmers, shareholders, must have confidence and trust in the financial system.
"Now this royal commission's establishment will end the uncertainty and speculation, it will conduct an inquiry into a thorough and conventional fashion, and so doing, it will protect the integrity of our banks, thereby ensuring Australians' trust in this critical issue is well funded."
BIG BANKS CALL FOR INQUIRY
Australia's major banks earlier called on the federal government to set up a "properly constituted inquiry" into the financial services sector.
The CEOs of the Commonwealth, Westpac, National Australia and ANZ banks made the request in an email sent to Treasurer Scott Morrison yesterday.
The letter was released by each bank in an ASX release this morning.
"We now ask you and your government to act to ensure a properly constituted inquiry into the financial services sector is established to put an end to the uncertainty and restore trust, respect and confidence," the senior bank officials said in the letter.
"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."
The banks want the inquiry to be led by a former judge with terms of reference "thoughtfully drafted and free of political influence".
Mr Turnbull repeatedly ruled out a royal commission into the banks in the past two weeks.
Nationals senators have been threatening to launch a bid within parliament to establish the inquiry.
This week they secured the numbers to launch the revolt, which would be humiliating for Turnbull.
The banks believe a Royal Commission is not needed.
"Our banks have consistently argued the view that further inquiries into the sector, including a Royal Commission, are unwarranted," the letter continued.
"They are costly and unnecessary distractions at a time when the finance sector faces significant challenges and disruption from technology and growing global macroeconomic uncertainty.
"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."
The chief executives said their banks had acknowledged that "we have not always got it right, and have made mistakes".
"Together with the Government and regulators, since 2014 we have been taking action to fix issues, and improve what we do and how we do it," they said.
"We have collectively appeared before, or taken part in 51 substantial reviews, investigations and inquiries since the global financial crisis, 12 of which are ongoing.
"We continue to demonstrate our commitment to doing the right thing by our customers and seeking to ensure those genuinely affected by these mistakes are appropriately compensated."