I was wrong not to call for banking inquiry sooner

Malcolm Turnbull has conceded it was a political error not to call an inquiry into the ‘unacceptable behaviour’ of banks sooner.

Malcolm Turnbull has conceded it was a clear political error not to call a Royal Commission into the “unacceptable behaviour” of the banks when he first “called out” the anti-customer culture of financial institutions.

The Prime Minister is still justifying the government’s decision not to call a Royal Commission two years ago and to resist Labor’s calls on the grounds that the Coalition has been able to pass tougher laws for financial misdeeds.

Mr Turnbull also said the Government “knew what the problem was with the banks” but wanted to introduce reforms immediately and the banks would have used the Royal Commission to defer reforms.

When Mr Turnbull and Treasurer Scott Morrison were forced to call a Royal Commission because of a revolt among Coalition backbenchers who threatened to cross the floor and join Labor and Greens in legislating for a Royal Commission, both said the decision was “regrettable” and could damage the standing of Australian banks internationally.

“In 2016 I gave a speech in which I called out the unacceptable behaviour of the banks and how there had been a failure to put customers first and that the culture of the financial services sectors was not delivering on their fundamental fiduciary obligation to put

their customers first,” Mr Turnbull said in Berlin overnight.

Mr Turnbull said he made the decision not to call a Royal Commission and addressing political reporters at a press conference said:” You are all right when you say when you say politically it would have been better for us if we had done it years ago.

“But the reason I didn’t proceed with a Royal Commission was this, I wanted to make sure we took the steps to reform immediately and got on with the job. My concern was that the Royal Commission would go on for several years and people would then say ‘you can’t reform, you can’t legislate, you have to wait for the report,’ and that’s what would have

been said,” Mr Turnbull said.

Mr Turnbull said that despite “hindsight and not being able to live our lives backwards” it was better that the government “got on” with its reforms, massively strengthened ASIC and created a one-stop shop for consumers; and now had a Royal Commission to consider the reforms the Government has put in place.

“Politically all of the political commentators are right when they say politically we would have been better off setting one up earlier but as it’s turned out I think we put customers first, put substantial reform first and had legislation passed,” he said.

“We knew what the problem was and frankly we do, some of the evidence is shocking but it is all consistent with the problem I identified two years ago which is that the culture of the banks and financial institutions has deteriorated far too frequently that does not put

customers first,” Mr Turnbull said.

“The obligation to put customers first was pre-eminent,” he said.

But Mr Turnbull said his judgment was that the Government needed to get on with the job of reform immediately.

“When you say the Government would have had less political grief if it set up a Royal Commission, you are right, clearly with the benefit of hindsight,” Mr Turnbull said.

Mr Turnbull said his decision was based on wanting to get substantial reforms up as soon as possible and the banks would have said the banks would have argued for a delay in reform if the royal commission was called.

In reaction to Pauline Hanson’s call for a fund to be created using the corporate tax intended for banks to be put into a fund for wronged customers Mr Turnbull said the banks must pay compensation and the Government was ensuring that would happen.