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Why we need a Royal Commission into banking and financial services

By Max Atkinson - posted Tuesday, 10 May 2016

There is now a heated debate over the need for a royal commission into banking and financial services, with the government continuing to defend its controversial inquiry into trade union corruption while rejecting moves by Labor and the Greens, backed by two-thirds of voters, for a comprehensive look into the murky world of money-lenders.

Just how compelling their case is was revealed on 29th April by The Guardian, which listed fifty-seven major Australian banking scandals since March 2009, most involving serious fraud or gross mistreatment of their own clients. This is a sample:

In March and April 2016 ASIC began legal proceedings in the Federal Court against the ANZ and Westpac respectively for ‘unconscionable conduct and market manipulation’ in setting the bank bill swap reference rate (BBSW) during the period 2010 to 2012.

On April 15, 2015 Adele Ferguson wrote in the Age that NAB needed to investigate the bank's culture after its British banks were fined a record $38.8 million for falsifying records and "inappropriate policies" to short-change purchasers of bank products. This followed an earlier damning parliamentary report into the mis-selling of ‘tailored business loans’.

In September 2012 ASIC announced its actions had forced the CBA to pay $136 million to customers for losses suffered on investments through Storm Financial. This was in addition to the $132 million CBA had paid out under its Resolution Scheme.


They also include the revelation that CommInsure, the Commonwealth Bank’s insurance arm, used unscrupulous practices to avoid claims, relying on an outdated definition of a heart attack to deny recovery for trauma. Its former Chief Medical Officer has revealed that doctors were pressured to rewrite medical opinions to avoid payouts.

While the government argues that these problems can be dealt with by ASIC - which it has recently ‘beefed up’ with more power and resources - Labor and the Greens insist on a royal commission. Their concerns were highlighted by the ABC’s Four Corners, which aired stories of sick and dying CommInsure policy holders.

The problem with the government’s case is that ASIC, which in 1991 replaced the separate state corporate regulators, was set up to “enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors”. It seeks to enforce the law by gathering evidence from witnesses, including those close to perpetrators. This requires confidentiality and perhaps covert operations; it has to protect witnesses and prevent suspects destroying evidence. The primary aim is to investigate criminal behaviour and enforce the law.

By contrast a royal commission is a comprehensive public inquiry to determine whether, after hearing submissions from concerned members of the public, there is a major social problem which has not been responsive to the ordinary processes of government, including its regulatory and policing agencies. It may call for ‘beefing up’ the latter, but it may also find that the law itself needs updating, perhaps with new crimes and harsher penalties.

The ambit of the commission is wider still - it may reveal that public attitudes, perhaps based on ignorance or prejudice, are in part responsible, so that educational programs are needed. It now seems clear that ignorance of the extent of abuse and the nature of victimisation have been major factors in the incidence of violence against women, and that this requires a better understanding of the role of psychological and financial dependence, as well as the need for protection at short notice.

Likewise the royal commission into sexual abuse of children has revealed the full extent of criminal behaviour, as well as the terrible consequences, with drug addiction, depression, crime, suicide and shattered lives.


It also brought out something which is still hard for most people to come to terms with - a seeming indifference to suffering on the part of those in charge - who include distinguished and often high-ranking members of the clergy. The evidence suggests they were driven by a concern to protect the reputation of the institution, be it a public service or a religious organisation.

The Fitzgerald commission into corruption in Queensland, set up by the deputy premier when Bjelke-Peterson was out of the state, was not a royal commission, but exemplifies the kind of systemic problem which calls for a comprehensive response, with a commissioner having the moral authority to ensure adequate terms of reference (Fitzgerald twice had to get extensions) and witnesses protected from threat of law suits. The corruption permeated the police and reached to the cabinet, with the premier charged with perjury and ultimately sacked by his own party.

By contrast, the royal commission into trade unions was always questionable, and difficult to justify on public interest grounds. The evidence pointed not to a corrupt system, but a failure to enforce the law, in part due to the silence of construction companies which paid bribes. The solution was reasonably obvious from the outset - to beef up police resources in order to gather evidence and secure convictions. It was the kind of illegality a special task force - perhaps backed by powers similar to those used by ICAC, the NSW anti- corruption body - should have dealt with.

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About the Author

Max Atkinson is a former senior lecturer of the Law School, University of Tasmania, with Interests in legal and moral philosophy, especially issues to do with rights, values, justice and punishment. He is an occasional contributor to the Tasmanian Times.

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