The banking royal commission was instigated by the Federal Government to investigate misconduct in the banking, superannuation and financial services industry.
The Commissioner (a retired Judge) will submit an interim report by 30 Sept 2018 and a final report by 1 February 2019.
First things first
Australia has one of the strongest and most stable banking, superannuation and financial services industries in the world, which performs a critical role in underpinning the Australian economy.
Furthermore, all Australians have a right to be treated honestly and fairly in their dealings with banking, superannuation and financial services.
Why a banking royal commission?
Over the past decade there have been a number of issues that have plagued the financial services industry in Australia including inappropriate financial advice; delays in processing insurance claims, inappropriate lending, failure to disclose fees and more recently unsatisfactory customer identification potentially leading to money laundering.
So the Federal Government (and the major banks) finally acknowledged the need for a banking royal commission in order to ‘clear the air’ and enable the financial services industry to re-establish a solid base for appropriate culture, governance, regulation and legal frameworks to ultimately ensure ongoing stability and public trust in the system.
So, what does this mean for consumers?
There’s good news and bad news.
The good news is that as a consequence of the banking royal commission all banks, insurance companies and superannuation companies are having a very long and hard look at themselves. The outcome of which will be improvements for consumers.
The bad news is that the massive shift of human and systems resources towards inward review has lead to less outward focus (i.e. writing new loans business).
Over the past several months we have witnessed far more stringent lending practices from the banks (not surprising seeing as the regulators are watching their every move).
If consumers want the banks to be more regulated then unfortunately it may well lead to the banks being more black and white in what they will and won’t do (for fear that any deviation beyond strict lending rules will end them up in trouble with the regulators).
We need the Australian banking system to be able to operate in a competitive and soundly (not overly) regulated environment so as to ensure a healthy availability of credit that will encourage businesses to borrow to invest, grow and employ more people.