Bank inquiry: speculation of compromise rejected

The government has sought to quash speculation it could raise the bank levy to fund a panel investigating bank misconduct.

“No plans to change bank levy.” Scott Morrison’s office rejects speculation. Pic: Sam Ruttyn

The Turnbull government has rejected speculation it could increase the bank levy to fund an independent panel investigating claims of misconduct in the banking sector.

It was suggested today the move could be part of a compromise deal to head off a backbench push for a royal commission.

Banking analyst Craig Williams, with investment bank Citi, told clients today that the federal government may set up a panel to deal with “legacy cases” that have been the bugbear of regional MPs, who have been inundated with constituents complaining of improper treatment by the major banks.

The Citi note, which does not cite sources, was sent to clients as the Turnbull government appears set to try to find a compromise solution to head off a banking royal commission.

“An independent panel may be established to deal with ongoing issues … which will be funded by a (slight) rise in the bank levy,” Mr Williams said. The government’s major bank tax, which was foisted on the sector in the federal budget, will cost the lenders around $6.2 billion over four years.

“The plaintiff would be funding the Commonwealth via a (slight) rise in the bank levy for a finite period. The banks would meet their own legal defence costs and would be liable for compensation payments if the panel ruled in the affected customer’s favour,” Mr Williams said.

But Treasurer Scott Morrison’s office rejected suggestions of a rise in the bank levy.

“There are no plans to change the bank levy,” a spokesman said. “Those claims are completely false and the report is misinformed. We are having individual and direct discussions with the banks.”

Mr Morrison yesterday met with the chairmen of three of the big four banks as the Turnbull government continued to resist calls for a banking royal commission.

National Australia Bank chairman Ken Henry, Westpac’s Mr Maxsted and ANZ chairman David Gonski held separate meetings with the Treasurer in Sydney.

The meetings came as Nationals senator Barry O’Sullivan circulated his draft private member’s bill to establish a wideranging inquiry into the banking sector, vowing to move it in the Senate next week.

Mr Maxsted said the meeting with the Treasurer concerned “a relatively narrow piece of reform agenda that the government has in mind”.

Prime Minister Malcolm Turnbull yesterday ruled out a banking royal commission, dismissing a Daily Telegraph report that he and his cabinet discussed reversing their policy on the issue amid threats from National Party senators and MPs to cross the floor.

Mr Williams said in the past, the banks have resisted mediation and may reject this proposal.

“The banks may reject the government’s proposal as they may form the view that they will get a royal commission under a Labor government in any case,” he said.

When asked yesterday what he was expecting to hear from the Treasurer on how to avoid a royal commission, Mr Henry said: “I’m hoping he has got the answer. That’s what I’m hoping. Nothing has worked thus far, right, but you never know.”