Politics wins the day as Big Four get more than they bargained for

The big four banks wanted a tightly scripted Parliamentary inquiry but have ended up with a wideranging royal commission.

Andrew Thorburn, Group Chief Executive Officer of NAB appearing at a House of Representatives Standing Committee on Economics at Parliament House in Canberra. Picture Kym Smith

The big banks have failed in their attempt to ward off a royal commission after waving the white flag and urging the government to end the uncertainty over an inquiry.

The banks contacted Prime Minister Malcolm Turnbull last night ahead of an urgently convened cabinet meeting this morning to announce the political backflip.

Treasurer Scott Morrison said the inquiry was “regrettable but necessary because of the political damage being caused.”

This was the push by his own side, with key Nationals pushing for an inquiry.

The banks wanted a tightly scripted Parliamentary inquiry but instead end up with a royal commission.

They also wanted the inquiry to supersede others already in place but this also won’t happen, with Scott “Cry me a River” Morrison saying the APRA review into CBA culture would proceed and, while he didn’t mention them, presumably the Productivity Commission probe into banking competition and the ACCC inquiry into the banks.

By waving the white flag in demanding the end uncertainty, the banks have bought the inquiry on themselves.

Turnbull has backflipped completely on the issue but then again he kicked off the latest political campaign against the banks last year when he attacked big bank culture in an address to the 199th Westpac anniversary dinner.

That opened the door for the ALP to push for a bank inquiry which they now have.

Turnbull has taken the issue off the table but the banks now face 12 months of grilling and no control about where the commission might travel.

Turnbull said today’s move was “a reflection of the uncertainty of the political system.”

Just last week Finance Minister Mathias Cormann told an luncheon an inquiry “wouldn’t actually lead to any public interest benefit at all”.

Now politics has demanded the inquiry will happen against that backdrop.

Suffice it to say Cormann is absolutely right and the inquiry is a waste of time.

The inquiry will report in February 2019 and cover the full financial sector including superannuation, banks, wealth management and insurance.

This effectively puts on hold the policy decisions which may flow from the Productivity Commission studies on superannuation and other measures in the industry.

Politics has won the day and whether consumers emerge better remains to be seen.

Turnbull has backed down completely in the face of an almost certain defeat on the floor of parliament.

That is not what good policy is made of.

The government’s attempt to defend the delay in the commission as being justified by the reforms already in place is a nonsense and simply highlights the complete lacks of leadership.

In stressing the financial strength of the banks, neither Morrison nor Turnbull made mention of their $1.6 billion tax hike on the sector.

Their claims the inquiry will help ease the uncertainty is also nonsense when just last week CBA chief Ian Narev said international investors can’t understand the need for an inquiry when the banking system is so strong.

This said, the banks own behaviour led them into this hole which will take some time to recover.