The advice comes thick and fast after Turnbull’s announcement.
Industry leaders were quick to react to Malcolm Turnbull’s announcement on Thursday of a royal commission in the financial services sector.
Gerard Brody, Chief Executive, Consumer Action Law Centre
“The royal commission into the financial services sector will empower people who have been ripped off by the banks, insurers and other financial institutions.
“It is a welcome opportunity for people to have their say, to share their families’ shocking experiences at the hands of the banks and insurers.
“We see irresponsible lending and over-indebtedness causing distress to individuals and families, reckless fee gouging including unjustifiable default fees, and tricky and unfair practices across a range of services. We see people struggling with protracted insurance claims and devastatingly unfair outcomes. The extent of these problems need to be unearthed.
“The broad terms of reference for the Royal Commission … does not seem to cover all credit providers, I think it is unfortunate if non-bank lenders are to be excluded from the inquiry.
“The inquiry needs to focus on the inappropriate incentives for banks and financial institutions to return high profits at all cost. This includes remuneration for senior staff which are at eye-watering levels.”
Eva Scheerlinck, Chief Executive, The Australian Institute of Superannuation Trustees
“This inquiry has been brought on by the banks themselves. They have abused their social license and betrayed community trust which has resulting in a deluge of complaints from their own customers.
“It is disappointing that the Government is seeking to deflect from the real and systemic problems plaguing the big four banks, by including the superannuation system in this inquiry. Australia’s super system is world class, and there is no evidence of gouging, fraud or unethical behaviour to warrant a Royal Commission into the industry.
“With only a twelve-month window to complete the inquiry, the Commission will be hard pressed to meet its obligations under the terms of reference in any meaningful way.”
Stewart Levitt, Partner Levitt Robinson Solicitors, litigator for victims of the Storm Financial scandal
“Some of the decisions taken by banks during the margin loan calls of 2009 through to 2011 beggar belief. The general interests of consumers were sidelined for the benefit and agendas of banks including CBA, BankWest, ANZ, Suncorp and so on. Maybe this Royal Commission will be able to answer the burning question: Why was money appropriated from borrowers and investors in such a way and was there another agenda, such as issues around access to capital.
“I would also like to see greater scrutiny of the tie up between the banks and the insolvency profession. Why are liquidators and trustees given full rein to rape and pillage the assets of borrowers? Basically, during the GFC , having signed up to a Bank Mortgage could be like pulling your pants down because the Banks mainly got away with having their way with you and your assets, at their whim. The insolvency profession were the Banks’ accomplices. I hope the Royal Commission deals with the rapacious and inadequately regulated insolvency profession-acting in the same enquiry and that the terms of reference are broad enough.”
Anna Bligh, Australian Bankers Association Chief Executive
“The risk posed by a parliamentary inquiry where the terms of reference and the appointment of a commissioner were left in the hands of minor parties and fringe elements of the parliament was a risk that was simply too big to take.
“The decision by the Government is the only way that uncertainty could be put to bed. The banking and finance sector of Australia is one of our most important global industries.”
Matt Grudnoff, economist, The Australia Institute
It is good to see Prime Minister Malcolm Turnbull finally change his position and agree to a royal commission into banking. It is somewhat concerning that he only did so after the big four banks wrote to him and told him it was okay to do so.
“Who he appoints to head the commission and what the terms of reference will be are very important to how effective it will be.
“Hopefully Mr Turnbull will resist the big banks’ influence in writing the terms of reference. It will be an enormous waste of taxpayer dollars if the commission does not get to the root of the problems in our banking system.”
Warwick Smith, research economist, Per Capita
“The financial services sector royal commission announced today by the Turnbull government is long overdue. The breadth and scale of bank misbehaviour far outweighs that of trade unions and the politically motivated hypocrisy of having a royal commission into the unions but not the banks was on the table for all to see.
It’s important to note that calling this a banking royal commission is a misnomer. Yes, the banks will be involved but so will the superannuation, insurance and wealth management industries. The big banks and the coalition potentially have a lot to gain from an inquiry if there is a strong focus on the links between unions and industry funds and the findings or the perception that results from the scrutiny is a negative one for the unions. The fact that the banks have asked for the commission should ring some alarm bells.”
Bruce Brammall, Managing Director, Bruce Brammall Financial and Bruce Brammall Lending
“The dismantling of conflicts of interest between financial institutions and the investment products they sell is imperative. Some banks have started to do this by selling off their wealth divisions and, while this appears like a good thing, it depends to whom these businesses will be sold. A royal commission could look at where institutional ownership of wealth products is still happening to the detriment of investors. Vertical integration in this sector needs a closer look.
“But one of the biggest scandals that this commission won’t be looking at is the way property investors are being fleeced by developers and their marketing arms. These groups pay commission as high as 5.5 per cent of a property’s value to accountants, financial planners and so on, if they effect a sale. In many cases, the properties are crap and the buyer loses any benefits of the investment. I think an inquiry that doesn’t look into how that sector can be better regulated will be missing a great opportunity to help protect consumers from dubious spruikers.”
Kate Carnell, Small Business Ombudsman
“The asymmetry in power between the banks and small businesses, together with the conduct of banks particularly since the global financial crisis in 2008, has left many small businesses in a devastating financial position.
“Many have lost their businesses as well as their family homes, with no prospect until now of obtaining access to justice.
“I’ve been concerned that in some cases there may have been unconscionable behaviour by the banks and this should be examined in the Royal Commission.”
Chris Bowen MP, Shadow Treasurer
“Malcolm Turnbull has spent 601 days fighting Labor’s call for a royal commission into the banking and financial sector. It says everything about Turnbull’s values and priorities that he only agreed to Labor’s royal commission when the banks told him he had to.
“He ignored the pleas of families and small businesses, he rejected the words of whistle-blowers. But when the big banks wrote him a letter, he folded the same day.
“Turnbull has always been – and always will be – on the side of the banks. He has let the rorts and rip-offs continue for more than 18 months so he could protect the banks and protect his job. That is unforgivable.”
Malcolm Turnbull is the best type of investment banker and he has successfully used the same skill set in politics: appease everybody, deliver nothing. And that is what this royal commission will deliver – nothing. The whole thing will be a snow job. We already have among the world’s best prudential regulations governing our banks … the ones that helped us survive the global financial crisis. The real question is why have governments allowed banks to break the rules and get away with it? Perhaps a better inquiry to have is one that looks into the relationship between banks and politicians.
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