ROYAL COMMISSION ‘GESTATION PERIOD’
April 2014 - November 2017
The financial sector Royal Commission began the “long gestation period”, as Mr Morrison would later describe it, in 2014 when a Senate Economics Reference Committee made the following recommendation among others exclusively in relation to the Commonwealth Bank only
2014 Senate Economic References Committee Report https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/ASIC/Final_Report/b03
Final Report Performance of the Australian Securities and Investments Commission. 26 June 2014
Recommendation 7 1
The committee recommends that the government establish an independent inquiry, possibly in the form of a judicial inquiry or Royal Commission, to: thoroughly examine the actions of the Commonwealth Bank of Australia (CBA) in relation to the misconduct of advisers and planners within the CBA's financial planning businesses and the allegations of a cover up; identify any conduct that may amount to a breach of any law or professional standard; review all files of clients affected or likely to be affected by the misconduct and assess the appropriateness of the compensation processes and amounts of compensation offered and provided by the CBA to these clients; and make recommendations about ASIC and any regulatory or legislative reforms that may be required.
With the Abbott Government ignoring this recommendation, Australian Greens Senator Wish-Wilson took the matter into the Senate chamber and began campaigning for a broad sweeping Royal Commission into the financial services sector.
In June 2015, Senator Wish-Wilson moved a motion in the Senate chamber--
Senator WHISH-WILSON (Tasmania) (16:07): I move: That the Senate— (a) notes: (i) the recommendations of the Economics References Committee inquiry into the performance of the Australian Securities and Investments Commission, and (ii) the allegations that financial planners at the Commonwealth Bank of Australia, National Australia Bank, ANZ Bank, Macquarie Bank and, most recently, IOOF had engaged in unethical and/or unlawful activity; and (b) calls on the Government to establish a royal commission into misconduct within the financial services sector.
I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator WHISH-WILSON: It is time for a broad-ranging royal commission in this country into white collar crime and misconduct in the financial services sector. Nearly 12 months ago, the Senate inquiry of the Economics Committee made a recommendation for a royal commission into the Commonwealth Bank. Following that, in the last 12 months, thanks to some brave whistleblowers and some dogged reporting from Fairfax journalists, we have seen allegations and revelations of misconduct at Macquarie Bank, ANZ, National Australia Bank and, recently, at IOOF. How many more scandals are lurking under the surface? Although the Senate has done some good work, and I do commend some of my colleagues in this chamber for their work, the committee made a recommendation for a good reason. That is, a royal commission would have the powers to get to the bottom of this and sort it out once and for all for the good of the financial services sector and for the good of the Australian people. I recommend my fellow senators support this motion.
Both the Australian Labor Party and the Coalition (with the exception of Senator John Williams) voted against the royal commission motion presented by Wish-Wilson.
Almost a year later, in April 2016, Senator Whish-Wilson again moved a second motion in the Senate, with very similar terms to the June 2015 motion.
Senator WHISH-WILSON (Tasmania) (19:42): I move: That the Senate— (a) notes:
(i) the recommendations of the 2014 Economics References Committee inquiry into the performance of the Australian Securities and Investments Commission,
(ii) the misconduct that has been uncovered in the financial planning arms of the Commonwealth Bank of Australia, National Australia Bank, ANZ Bank and Macquarie Bank,
(iii) that IOOF are being investigated for insider trading and front-running,
(iv) That the insurance arm of the Commonwealth Bank is alleged to have unfairly and fraudulently denied life insurance claims,
(v) that court proceedings have been initiated against ANZ Bank and Westpac for manipulation of the bank-bill swap rate, and (vi) the lending practices of ANZ Bank and Bendigo Bank that contributed to the collapse of forestry managed investment schemes;
(b) calls on the Government to establish a Royal Commission into misconduct in the banking financial services sector; and (c) notes That the Australian Greens moved a motion for the Senate to support a Royal Commission on 24 June 2015.
This time the motion was supported by the Australian Labor Party and some cross-benchers, but again voted against by the Coalition [For 34 -Against 27] with five pairings for absentees.
The Bill passed the Senate and was then debated and rejected by the Coalition in the House of Representatives.
On April 8th 2016, with an `election around the corner, Opposition leader and Shadow Treasurer Chris Bowen announced that an elected Labor Government would immediately launch a Royal Commission into the financial services sector with an emphasis on “the big banks”.
Chris Bowen said a royal commission would examine the banking and financial services sectors, including superannuation funds, and cost $53m.
The royal commission would conduct a two-year inquiry into the banking and financial services sectors, including superannuation funds, and cost $53m.
Mr Shorten said the sector had been rocked by a string of scandals that were “not isolated and one-off examples” but rather pointed to systemic problems in the industries.
“Australia has one of the strongest banking sectors in the world and we want to keep it strong. But public confidence in the banking and financial services industry has taken hit after hit over the previous few years. Many Australians have suffered through the decisions of banks and financial institutions. Retirees who have lost their retirement savings, small businesses who have lost their livelihood, Australian families who have lost hundreds of thousands of dollars, life insurance beneficiaries denied justice and legitimate claims. There are literally tens of thousands of victims if not more. And today I say enough is enough.”
Then Treasurer, Scott Morrison said responses to banking scandals needed to be proportional.
“The problems have been identified and are being dealt with by the Australian Securities and Investments Commission (ASIC), which he called “a tough cop on the beat. The government is not proposing a royal commission and has opposed one consistently,”
The Australian Bankers’ Association’s chief executive, Steve Munchenberg, said:
“We don’t understand what this royal commission is meant to achieve. The royal commission sends a worrying signal and would decrease confidence in the banking system. Foreign investors would be asking what is wrong with Australian banking sector”.
Liberal MP Warren Entsch welcomed Turnbull’s recognition of problems in the sector but said
“an apology from the big banks and a commitment not to do it again in the future is not enough. I believe we need to go further – we need a full royal commission into the profit-driven and immoral activities of the big banks and they must pay an appropriate level of compensation to clients for past wrongs,”.
Source: Katharine Murphy. Labor Calls for Banking and Financial Services Royal Commission. The Guardian, 8 Apr 2016 https://www.theguardian.com/business/2016/apr/08/labor-calls-for-banking-and-financial-services-royal-commission
By late November 2017, momentum for a Royal Commission was mounting. Michael Roddan at The Australian reported that Nationals senator Barry O’Sullivan was circulating a draft private member’s bill to establish a wide-ranging inquiry into the banking sector, vowing to move it in the Senate.
Finance Minister Senator Mathias Cormann attempted to quell the momentum, saying that while an inquiry might be
“an attractive political exercise for some ... it wouldn’t actually lead to any public interest benefit. It would be another long, costly process that wouldn’t provide us with any new information. A more important thing to do right now, we believe, is to deal with the issues that we all know have emerged in recent times — to address them. The most important thing about banking and Australia and the role of banks in the competitiveness in Australia is having a strong system that attracts those deposits.”
Westpac chairman Lindsay Maxsted has warned that persistent calls for a royal commission could lead to higher funding costs for the banking system, which would ultimately be felt by borrowers in the form of higher interest rates.
Dr Henry, a former Treasury secretary, said the increasing chances of a royal commission had not yet turned global investors away in enough numbers to affect funding markets, but the calls were starting to make global investors worry about the system’s health. “We are getting increasing numbers of people saying: ‘What the hell is going on down there?’,” Dr Henry said.
He said the world believed Australia had one of the safest, most secure and stable banking systems in the world. But he said the bank bashing had investors questioning whether “there’s some problem there” and that calls for a royal commission were hints that there was more that investors did not “know about” the banks.
Other banks claimed a Royal Commission could see international investors turn their backs on the sector. Australian banks rely on international wholesale funding markets for about a third of their funding, with local depositors making up the balance. Last financial year the big four banks raised almost $150 billion in wholesale funds.
Source: Michael Roddan. Financial Services sector claims banking royal commission would drive up interest rates. 24 November 2017. https://www.theaustralian.com.au/business/financial-services/calls-for-banking-royal-commission-to-drive-up-interest-rates/news-story/1b8782f28664737e484e7449bdad7341