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Sometimes, in life or business, you have to make the least-bad choice.
Australia’s banks never thought a royal commission was warranted.
But as speculation of a parliamentary commission of inquiry (similar to a royal commission but formed by the Parliament) into banks continued to increase, Australia faced a clear choice.
One, a cobbled-together inquiry designed by minor parties, disgruntled backbenchers and fringe elements of the Parliament. An inquiry that could take a cricket bat to the savings and superannuation of millions of ordinary Australians.
Or, a properly established royal commission set up by the government and led by a respected member of the judiciary with sensible riding instructions.
The least bad choice was obvious.
The banks made their call to protect the interests of all Australians and the economic credentials of the nation.
Australia relies on funding from offshore to keep the country ticking over because we spend more than we earn and save. Our banks are critical to raising those funds and then funnelling them through the economy to businesses and homeowners.
Ongoing political uncertainty risked denting our banks’ ability to keep doing that, which was too big a risk for our nation. Putting that uncertainty to bed once and for all will benefit everyone in the long run.
Despite clearly not always doing the right thing by all customers, Australia’s financial system is recognised as being one of the strongest in the world.
So there are many arguments against a royal commission.
Firstly, there’s the actual cost; the $75 million the government has budgeted is almost certain to blow out.
Banks have also already been doing their own housecleaning after acknowledging mistakes.
Alongside their individual initiatives, banks have pushed through industry-wide reforms, including separating bonuses from sales targets, stronger whistleblower protections and the introduction of Customer Advocates inside banks to assist with complaints. Banks do not fear scrutiny and have already had almost all areas of their operations probed.
Since the GFC, the banks have co-operated with 51 inquiries, reviews and investigations, 12 of which are ongoing.
Turning Australia’s banks into international pariahs comes at a price.
It will impact on Australia’s reputation among international investors who will rightly be asking: what is going on in Australia, a major national economy, that requires such unprecedented scrutiny?
The nation’s banks rely on money from international debt markets. Anything that makes that funding more expensive or less available can ultimately be passed through to the cost of mortgages and other loans.
The question which occupied the banks was this: at what point does the cost of continued uncertainty, instability and harm from political horse trading outweigh the price tag to the nation of a royal commission?
On Wednesday night banks crossed that Rubicon.
The health of the nation’s banks is tied to the lives of Australians, be they savers, mortgageholders or businesspeople, large and small.
Millions of Australians own shares directly in banks or via their superannuation funds, relying on their dividends.
The major banks acted in the national interest to minimise more serious risk to the banking sector and welcome the fact that the government has stepped in to bring certainty to this issue.
Labor’s support for a royal commission is also acknowledged, as is that from other parties.
Bipartisan agreement on a properly constituted inquiry, free from political interference, is the best way forward if we are to avoid further damage to Australia’s financial services sector.
The royal commission is the least bad choice.
Anna Bligh is Australian Bankers’ Association chief executive.
This piece first appeared in the Herald Sun on November 30, 2017.