In an extraordinary backflip, Prime Minister Malcolm Turnbull announced a royal commission into the financial services sector this morning, labelling the move “regrettable but necessary”.
The announcement followed an email from the heads of the four major banks to Treasurer Scott Morrison telling the Government it was time to act “in the national interest”.
- The royal commission will investigate the banks, big and small, wealth managers, superannuation providers and insurance companies.
- It will be chaired by “an eminent and respected ex judicial officer”.
- A final report is due by February 1, 2019.
- The estimated cost is $75 million.
The banks had previously argued that an inquiry into a series of scandals that has plagued the industry and caused a widespread lack of public trust was unwarranted and costly at a time when the sector was facing a raft of challenges.
However, they said this morning: “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.”
Mr Turnbull said the speculation about an inquiry could not be allowed to go on.
“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.”
Investors reacted quickly to the news. When trading opening this morning, CBA shares dropped 2.2 per cent, Westpac 1.7 per cent, ANZ 1.3 per cent and NAB 1.2 per cent.
The royal commission will run for 12 months although Mr Turnbull quickly qualified that timeline, saying “being realistic about this, royal commissions take longer than originally planned”.
Australian Bankers Association Chief Executive Anna Bligh described the royal commission as “an extraordinary and unprecedented step”.
“The banking and finance sector of Australia is one of our most important global industries,” she said.
“It is one of the most significant contributors to the global economy. It is too important to put in the hands of minor parties and fringe elements of the parliament.”
How do you feel about this announcement? Are you surprised at the PM bowing to bank pressure? Do you think there’s an ulterior motive?