Australian government announces Royal Commission into alleged misconduct of financial services providers pledging 'it won't be a never-ending lawyers’ picnic'

The Australian Government has announced plans for a Royal Commission into the alleged misconduct of Australian banks, insurers, financial services providers and superannuation funds.

This is big news for the parents of New Zealand's big four banks - the ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank and the Westpac Banking Corporation.

Here's the announcement (below) from Australian Prime Minister Malcolm Turnbull and Treasurer Scott Morrison. The announcement came after the major Australian banks published a joint letter calling on the Australian Government to act decisively to deliver certainty to the country's financial services sector, its customers and the community.

The Turnbull Government will establish a Royal Commission into the alleged misconduct of Australia’s banks and other financial services entities.

All Australians have the right to be treated honestly and fairly in their dealings with banking, superannuation and financial services providers. The highest standards of conduct are critical to the good governance and corporate culture of those providers.

We have one of the strongest and most stable banking, superannuation and financial services industries in the world, performing a critical role in underpinning the Australian economy. Our banking system is systemically strong with internationally recognised world’s best prudential regulation and oversight.

Ongoing speculation and fear-mongering about a banking inquiry or Royal Commission is disruptive and risks undermining the reputation of Australia’s world-class financial system.

The Government has decided to establish this Royal Commission to further ensure our financial system is working efficiently and effectively.

Instead of the inquisition into capitalism that some have called for, the Royal Commission will take a conventional, focussed approach. It will not be a never-ending lawyers’ picnic.

Our approach to banking and financial services reform has focussed on ensuring that our financial system is resilient, efficient and fair. 

We have moved to establish a new one-stop shop to resolve customer complaints; significantly bolstered the Australian Securities and Investments Commission’s powers and resources; created a framework to hold banking executives accountable for their actions; and acted to boost banking and financial services competition for the benefit of customers.

We will ensure that the Inquiry will not defer, delay or limit, in any way, any proposed or announced policy, legislation or regulation that we are currently implementing.

The Inquiry will consider the conduct of banks, insurers, financial services providers and superannuation funds (not including self-managed superannuation funds). It will also consider how well equipped regulators are to identify and address misconduct.  It will not inquire into other matters such as financial stability or the resilience of our banks.

This will be a sensible, efficient and focussed inquiry into misconduct and practices falling below community standards and expectations. Most Australians are consumers of banking and financial services, and we all have the right to be treated honestly and fairly by banking and financial services providers.

Trust in a well-functioning banking and financial services industry promotes financial system stability, growth, efficiency and innovation over the long term.

The proposed terms of reference will form the basis of the Letters Patent, terms of which will be recommended to His Excellency, pursuant to the Royal Commissions Act 1902.

The Draft Terms of Reference are here.