Politics

The PM Has Been Humiliated Into Calling A Royal Commission Into The Banks

Well, this is embarrassing.

Royal Commission

Look at the faces of the two men up there ^^. Those are two deeply unhappy faces. That’s because the government has been forced to announce a Royal Commission into Australia’s banking industry after years of opposing it, because literally everyone — including the banks themselves — called for it.

You may think a commission into the banks is boring, but stick with me because it’s kind of important.

What Actually Happened?

Labor and a handful of government backbenchers have been calling for a Royal Commission into the banking industry for years after a series of scandals involving the big four banks.

These scandals include allegations of money laundering (possibly even allowing money to make its way into the hands of terrorists), unfair lending practices and general dodginess.

The political pressure has been building on the Turnbull government lately (more on that soon), but the PM and the banks have been stubbornly resisting calling an inquiry. Until this morning.

What happened this morning? Well, the big four banks kinda stabbed the PM in the back by sending him and Treasurer Scott Morrison a letter calling for an inquiry.

The letter, signed by the chairpersons of the Commonwealth, Westpac, National Australia and ANZ banks, called for a “properly constituted inquiry” to restore confidence in the system.

“It is now in the national interest for the political uncertainty to end,” they wrote. “It is hurting confidence in our financial services system, including in offshore markets, and has diminished trust and respect for our sector and people.”

Why Is This Bad For The PM?

Malcolm Turnbull has been telling us for ages that a Royal Commission into the banks is a terrible idea because it would hurt confidence in the system and affect Australia’s reputation internationally. But this morning, with even the banks calling for an inquiry, he had no choice but to front up to the cameras and explain why he’s suddenly calling one.

He still thinks it’s a bad idea, but he said he has no choice.

“Since the financial crisis, there have been examples of misconduct by financial institutions. Some of them extremely serious. And that’s demanded a response from the institutions themselves and from government,” he told reporters in Canberra.

“The only way we can give all Australians a greater degree of assurance is a royal commission into misconduct into the financial services industry.

And it’s not just the banks that are causing headaches. A handful of government backbenchers, mostly from the Nationals party (some of the banks’ misdeeds have really hurt farmers), were threatening to cross the floor of parliament to support Labor’s motion a banking inquiry.

With dual citizens Barnaby Joyce and John Alexander out of parliament, there’s a real chance that motion would have succeeded, humiliating the PM and bringing his authority into question.

The PM has been scrambling all week to come up with a solution that would keep everyone happy, but now the banks have gone and cut him off at the knees.

So Who Wins?

Pretty much everyone tbh, but especially Bill Shorten. The Opposition Leader is effectively running the government’s agenda now. He’s been calling for this inquiry for years, and now he’s got it.

It’s also a win for the handful of government MPs who have been putting pressure on the PM for months. It’s more proof that Turnbull doesn’t have a lot of power in his own party. Today, he should be celebrating the successful passage of marriage equality through the Senate. Instead, he’s caving into his own backbench.

Of course, it’s also a big win for the many, many people who have fallen victim to the banks’ wrongdoing over the years.

What’s Next?

A Royal Commission is a really big deal. It’s the most powerful investigative body we have. It may have the power to compel witnesses to testify, and it will be able to recommend charges against people.

Treasurer Scott Morrison today sought to re-assure people that this isn’t bad news for the banks, but there’s no doubt that all of the major banks will take a hit.

“Australia’s banks are unquestionably strong, nothing that we have announced today changes this or gives any reason to question this, on the part of the government,” Morrison said. “This is an important message for markets and the international financial community, it does not question the robust nature of our prudential system.”

The inquiry will cover the entire financial sector. That’s big and small banks, wealth managers, insurance providers and superannuation companies, and it will run for 12 months.

We don’t have a lot more detail on what the inquiry will look like yet, but one thing we do know is that today is a very bad day for Australia’s banks and for Malcolm Turnbull.