The Prime Minister stated it would not occur, however it has. The banks stated they did not need it, however they do.
But in December the Government ended the on-again, off-again debate and made it official: we may have a banking royal fee.
This is how we received right here:
What sparked issues with the banks?
It’s an extended story, however Australia’s banks have been plagued with one scandal after another over the past decade.
At the guts of it’s the banking industry’s promotion of an aggressive, sales-driven culture, which emphasises revenue in any respect prices.
In addition, there’s the flawed compliance construction, and the refusal of banks to hold anyone in a senior position accountable.
Three years in the past, ABC’s Four Corners shone a light-weight on the Commonwealth Bank’s financial planning scandal.
The financial institution’s monetary advisers misled its clients and really helpful speculative investments, which resulted in them dropping lots of of tens of millions of dollars.
Commonwealth Bank’s monetary planners have additionally been accused of forging signatures, overcharging fees and creating unauthorised investment accounts for patrons with out their permission.
This occasion was a set off for the Senate inquiry in 2014, which recommended a royal commission.
CBA was not the one financial institution in hassle — Westpac, ANZ and NAB have also been implicated in the financial planning scandal.
The company watchdog ASIC additionally discovered the most important banks have been slugging their clients $178 million in financial advice which was never provided.
CBA’s insurance coverage arm additionally got here underneath hearth final yr for using unethical tactics to avoid paying out legitimate claims.
For instance, CommInpositive used outdated medical definitions to delay or deny payments to policyholders, and pressured medical assessors to reject claims.
On prime of that, CBA’s chief government conceded no staff members had been sacked over the CommInsure scandal.
More just lately, CBA has been pressured to defend itself in courtroom over allegations it systematically breached anti-money-laundering and terrorism-financing laws on nearly 54,000 occasions and will probably face about $1 trillion worth of fines.
Westpac, ANZ and NAB have additionally been caught within the crossfire of litigation.
Those banks allegedly rigged the financial institution invoice swap fee, one of many key rates of interest within the financial system (which offers a benchmark for setting private and business mortgage charges).
Although ANZ and NAB admitted wrongdoing and settled their instances towards ASIC for $50 million every, Westpac refused to back down and is still fighting its case in the Federal Court.
Haven’t they already paid up?
Yes, to a point — the banks have needed to make some main modifications over the previous few years and a few of them have been pricey.
Since the monetary disaster, Australian banks have forked out greater than $1 billion in fines and compensation for rorting their very own clients.
The huge 4 banks’ (plus Macquarie Bank’s) income may even be affected by the Federal Government’s levy, which taxes their money owed above $100 billion at a zero.06 per cent annual fee.
Although the Government expects this to boost $6.2 billion over the subsequent 4 years, the ABC recognized a $2 billion shortfall in that forecast.
However, the large banks haven’t dominated out passing the impression of the levy onto its clients.
The huge 4 banks additionally determined to drop ATM charges in September. That choice was quickly seen as a move to dodge a royal commission (one thing the banks did not need at that time).
Why do they abruptly need an inquiry?
The place taken by the banks and the Government is that they need to handle the uncertainty within the monetary sector head on.
This is taken from the banks’ letter to the Treasurer.
“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.”
The letter acknowledges the earlier place of the large 4 banks that an inquiry like this might be, “unwarranted … costly and unnecessary distractions”.
“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.”
But a extra cynical reply may be that an inquiry of some type into the banking sector is inevitable, they usually needed some management within the course of.
Why did the PM change his thoughts?
Quite merely, as a result of the Government is beneath strain.
Malcolm Turnbull responded to a reporter’s query on the backflip by saying: “Government policy remains the same until it’s changed.”
“This was a choice of the Cabinet that simply concluded.
“That is the primary level I need to stress to you. Obviously, there’s been lots of modifications within the political surroundings right here.
“We’ve got two by-elections under way, the numbers are down in the House of Representatives … you all understand the political circumstances.”
The Opposition has been calling for a royal fee for greater than 18 months.
Last month, issues received a bit of trickier for the PM when rumblings started on his personal aspect of politics.
Nationals senator Barry O’Sullivan drafted a invoice calling for an inquiry into the sector and two of his colleagues threatened to cross the ground to help it.
If members of Mr Turnbull’s Coalition Government have been to interrupt ranks and pressure an inquiry into the banks, it might be fairly embarrassing for him.
Where to from right here?
Well, there’s so much we nonetheless do not know, however the PM did announce he would appoint a “distinguished serving or former judicial officer to lead the commission”.
He additionally stated the price range for the inquiry was $75 million and he needs an last report delivered by February 2019.