A formal policy announcement by the Federal Opposition at the end of last week, calling for a Royal Commission into the banking and financial services sector, has swiftly turned into a game of political ping pong.
Last Friday, Labor’s Shadow Minister for Financial Services and Superannuation, Dr Jim Chalmers, announced a Shorten Labor Government will hold a Royal Commission into misconduct in the banking and financial services industry.
In his release, Dr Chalmers noted “This is an important decision that was not taken lightly – it’s been made after careful consideration over an extended period of time.” He added that the confidence and trust in the financial services industry has taken a huge hit over an ongoing range of scandals and high profile consumer rip offs: “We need Australians to have confidence in their banks and financial institutions, to sweep away the doubt, to uncover and deal with unethical behaviour that compromises that confidence.”
In documenting those Australians impacted, the Shadow Minister included reference to “Life insurance policy holders denied justice.”
ASIC has the powers of a Royal Commission…
Responding later in the day at a Melbourne doorstop interview, Treasurer, Scott Morrison, said Labor did not respect the Royal Commission process. While acknowledging that issues exist within the sector, the Treasurer voiced his support for the current regulatory system overseen by ASIC and APRA: “…there is no doubt there are serious issues that have to be addressed in the banking sector and in the financial services sector. That is why we have a tough cop on the beat in that area – it is called ASIC. We have a strong regulator – it is called APRA.” Mr Morrison also noted “ASIC has the powers of a Royal Commission and in fact it has greater powers than a Royal Commission.”
Labor issued a statement this week questioning the accuracy of Mr Morrison’s assertion that ASIC has the powers of a Royal Commission. Under the headline banner ‘Malcolm and Slomo Wrong on Royal Commission’, Labor asserts the Treasurer made “…factually inaccurate comments on the powers of a Royal Commission compared to those of the Australian Securities and Investments Commission.”
The statement advocated that Royal Commissions could extend their reach beyond the capabilities of ASIC”…there is no more powerful body to address systemic problems and misconduct than a Royal Commission. This is why the decision to bring forward a Royal Commission into the financial services industry under a Labor government was not taken lightly.”
Labor’s statement added that while ASIC has the power to deal with individual cases and to investigate and pursue individual instances of wrongdoing, a Royal Commission has a far broader reach.
Responding to this assertion, the Treasurer has released a fact sheet that documents and compares the relative powers and capabilities of a Royal Commission and ASIC in a number of key areas, as outlined in the following table (where legislative references are to the Royal Commission Act and to the ASIC Act):
Riskinfo will report as further developments unfold in this debate, which has moved away from the reason for why a Royal Commission has been called to focus instead on the relative capacity of the regulator and a Royal Commission to address the issues stated by Labor, which would include examination of:
- How widespread instances of illegal and unethical behaviour are within Australia’s financial services industry
- How Australia’s financial services institutions treat their duty of care to their customers
- How the culture, ethical standards and business structures of Australian financial services institutions affect the behaviour of these institutions
- Whether Australia’s regulators are really equipped to identify and prevent illegal and unethical behaviour
- Comparable international experience with similar financial services industry misconduct and best practice responses to those incidents
- Other events as may come to light in the course of investigating the above
