Banks back inquiry to avoid instability
AUSTRALIA’S peak bank lobby group says the industry has decided to support a royal commission to ensure our banks do not become international “pariahs”.
A commission is now necessary as a circuit breaker to the continuing instability created by “political horse trading”, Australian Bankers’ Association chief Anna Bligh said. She said such instability could push up the cost of mortgages and other loans.
Her comments came after Prime Minister Malcolm Turnbull yesterday unveiled plans for a royal commission into misconduct across the financial services sector.
Ms Bligh said the instability that had been buffeting the sector could undermine the reputation of Australian banks globally, leading to higher prices for the funds they borrow offshore to lend out at home.
“Anything that makes that funding more expensive or less available can ultimately be passed through to the cost of mortgages and other loans,” she says.
The chief executives and the chairs of the major banks said yesterday they had written to Mr Turnbull on Tuesday asking for a “properly constituted inquiry” into the financial services sector in the face of widespread calls for a commission or another sweeping inquiry.
Ms Bligh said a commission is the “least bad choice” and the Government’s model is better than a “cobbled-together inquiry designed by minor parties, disgruntled backbenchers and fringe elements of the Parliament”.
Such an inquiry “could take a cricket bat to the savings and superannuation of millions of ordinary Australians”, she said.
Shares in all major banks fell after the commission was announced, but recovered in later trading.
National Australia Bank ended the day 0.03 per cent higher at $29.59. Westpac finished 0.03 per cent lower at $31.47 while ANZ closed down 1.1 per cent at $28.46.
The Commonwealth Bank, which has been the subject of a succession of sagas over misconduct and errors among staff, bore the brunt of the market’s concern. Its shares fell 1.9 per cent, closing at $79.43.
UBS banking analyst Jonathan Mott said the commission would be “expensive and distracting” for the major banks, likely costing $50 million to $100 million each.
“It is difficult to predict what the final recommendations will be,” Mr Mott said.
“However, we believe it is in all political parties’ interest for the recommendations to be material and lead to cultural change.”
One industry source expected former chief executives to be called up, including ANZ’s Mike Smith, Westpac’s Gail Kelly and CBA’s Ralph Norris.
Mr Turnbull said the commission would investigate how financial institutions had dealt with cases of misconduct in the past and whether those cases exposed cultural and governance issues.