Friday, December 1, 2017
As detailed by The Sydney Morning Herald, the Australian government announced this week that it will convene a Royal Commission to examine potential misconduct by the Australian banking and financial services sector. The announcement was made by Prime Minister Malcolm Turnbull after a letter was received from four banks asking that a commission be established. The communication from Commonwealth Bank, Westpac, National Australian Bank, and ANZ Banking Group asked that a “properly constituted inquiry” be conducted. The bank letter opened by saying,
We are writing to you as the leaders of Australia’s major banks. In light of the latest wave of speculation about a parliamentary commission of inquiry into the banking and finance sector, we believe it is now imperative for the Australian Government to act decisively to deliver certainty to Australia’s financial services sector, our customers and the community.
Our banks have consistently argued the view that further inquiries into the sector, including a Royal Commission, are unwarranted. 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 establishment of the Royal Commission comes after several scandals involving financial institutions, including regulatory actions regarding rate rigging, money laundering, and misuse of client funds.
According to the draft terms of the reference, the Royal Commission inquiry will be broader than simply investigating alleged criminal activity. The reference includes instructions to examine:
- “[T]he nature, extent and effect of misconduct by a financial services entity (including by its directors, officers or employees, or by anyone acting on its behalf)”
- “[A]ny conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations”
- [T]he use by a financial services entity of superannuation members' retirement savings for any purpose that does not meet community standards and expectations or is otherwise not in the best interest of members”
The Royal Commission will last for twelve months and a final report is expected by February 2019. Given the breadth of the inquiry, however, it would not be surprising to see the work of the commission continue on longer.