Day 415: 'Should have got on with it earlier'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 415.
Today in summary: Labor and the Coalition have confirmed they will continue to accept political donations from the banks; documents revealed under FOI show the major banks colluded with the government ahead of the announcement of the banking royal commission; speculation is rife that it’s only a matter of weeks before National Australia Bank executives are removed; and Bill Shorten wants Scott Morrison to schedule more parliamentary sitting days to implement the guts of the banking royal commission.
We found out yesterday that a new regulator of the regulators will be created to give spine to the existing watchdogs. For more details, check out David Ross’ examination of how the new system should be constructed.
-- Alex
alexs@schwartzpro.com.au @AlexESampson
Current banker panic level: 🥴🤕😤
Please don’t keep The Inquisition to yourself. Forward this email to your colleagues and encourage them to sign up for free here.
1. Banking royal what? Labor and the Coalition have confirmed they will continue to accept political donations from the banks, arguing its all part of democracy. Fairfax journalist Max Koslowski writes:
“Two of the major banks have been referred to regulators for likely criminal conduct, raising questions about whether the major parties should continue to accept nearly $1 million in political donations ahead of a federal election in which former High Court judge Kenneth Hayne's report will be a crucial battleground.”
But Treasurer Josh Frydenberg hit back at the suggestion, saying banks “like any other legal institution in our community,” should be allowed to support political parties. Which makes sense, given the banks are one of the biggest donors to the Liberal party. But they receive only slightly more than what they give to Labor, with ANZ giving equally to each party.
2. ACTU secretary Sally McManus this afternoon held a short press conference to address revelations – in the form of a series of letters and emails released under the Freedom of Information Act – that there was collusion between Scott Morrison and the banks ahead of an announcement of a royal commission. The correspondence allegedly shows the Morrison government worked closely with the heads of the big banks – including former Treasury boss and NAB chair Ken Henry – in the days before the announcement of the banking royal commission, at which time the banks, including NAB, made a public statement that an inquiry was needed.
“The documents reveal that Dr Henry provided then-treasurer Scott Morrison with a draft of a letter bank bosses intended to send him effectively providing permission for a royal commission, and outlining the terms of reference and timeline that best suited their needs,” a statement from the union said.
Read the letter on the ABC.
3. Speculation is rife that it is only a matter of weeks before National Australia Bank executives are removed for the damage they caused during the banking royal commission. Prime Minister Scott Morrison today said NAB chief executive Andrew Thorburn and chairman Ken Henry should reflect on their positions, after coming under scathing criticism in the banking royal commission, after Thorburn refused to accept the harsh criticism of his leadership.
“As the CEO, this is very hard to read, and does not reflect who I am or how I am leading, nor the change that is occurring inside our bank. While we have made mistakes, I believe there is a lot of evidence that we are making sustainable and serious change to once again regain the trust of all our customers,” Thorburn said in a statement.
4. Bill Shorten wants Scott Morrison to schedule more parliamentary sitting days to implement the guts of the banking royal commission, calling today a “day of shame’’ for the banks, and insisting on swift action to rebuild trust in the sector. Labor vowed before the report was released to implement any and all recommendations and has recommitted to that promise since the report was released yesterday.
Here’s how the major banks reacted to Hayne’s final report
NAB
National Australia Bank chief executive Andrew Thorburn said his attitude and leadership were the “polar opposite” of how the banking royal commissioner, Kenneth Hayne, described him, and he remains “determined” to stay on in the bank’s top job.
“I have cancelled my planned long-service leave, aside from a personal family commitment next week.”
ANZ
ANZ chief executive Shayne Elliott said the royal commission had been a “humbling experience”.
“I recognise the size and nature of our compliance and culture challenge. And I am determined we deal with it.”
CBA
Commonwealth Bank of Australia chief executive Matt Comyn said the bank was addressing past failings, implementing important changes and improving its processes to ensure it remained focused on what was best for its customers.
“We are implementing stronger policies and processes, including a new Code of Conduct.”
“There is still much work ahead to earn back trust but we are determined to restore broad respect and support for the important role that a major financial institution like CBA has to play in our economy and community.”
Westpac
Westpac Group – the only major bank not directly referred by Hayne for civil and criminal prosecution – chief executive Brian Hartzer said the report was a “turning point” in the process of rebuilding community trust in banking. He said Hayne’s recommendations would guide decision making in financial services for years to come.
“We will work with policy makers and regulators on the best path forward for customers and the industry. Our focus remains on learning from the mistakes of the past and preventing them from happening again.”
AMP
AMP said it had already embraced the need for change and taken “significant action” to improve culture, governance, accountability and processes across the group including.
“AMP notes that the benefits of vertical integration remain available for customers while acknowledging that conflicts of interest need to be more effectively managed. The proposed regulatory changes will require serious and determined effort to implement but, with the support of industry, should deliver better outcomes for customers,” chairman David Murray said.
Today’s burn prize: Former Prime Minister Malcolm Turnbull
🔥🔥🔥
“We should have got on with it earlier”.
Turnbull is the first Lib to admit the delay in calling the banking royal commission was a mistake.
The Commentariat
The Australian’s editor at large Paul Kelly questions who is responsible for fixing the mess Commissioner Kenneth Hayne has identified. Is it the existing government, which is facing a tough election and has only a handful of sitting days left? Or will it be an incoming Labor government, which had pledged undying support for banking reform for years? Kelly also questions whether “systemic reform be achieved and what will be the price?”
“While the Morrison government and Labor were on the same page in offering broad endorsement of the Hayne recommendations, Bill Shorten inherits a powerful legacy — Labor is vindicated in its call for the royal commission and will deploy its findings as condemnation of the government that resisted this inquiry for so long.”
InvestSMART editor in chief Alan Kohler labels the banking royal commission an eloquent failure, arguing that none of the recommendations would have a material financial impact on the banks. Kohler is most disappointed by Hayne’s decision to continue to allow banks and wealth managers such as AMP and IOOF to use financial advice for the distribution of wealth products.
“His decision to not call for the separation of product and advice is both inexplicable and egregious. Another significant failure is that he has nothing to say about percentage fees and the high cost of financial advice. In fact, he seems to applaud it.”
Bloomberg opinion columnist David Fickling labels the banking royal commission's final report a “dud” because it fails to build a spine for regulators.
“A law is only as strong as its enforcement, and it's there that the report falls down.”
“Preventing the weeds of misconduct from growing depends not on design, but on the vigilance of the gardeners.”
Companies, markets and economy commentator Elizabeth Knight writes in the Sydney Morning Herald that there was nothing in Hayne’s recommendations that will punish bank profits.
“The market’s response was both overwhelming and un-ambivalent.”
“Westpac soared 7.4%, Commonwealth Bank (the most heavily shorted bank stock) bounced 4.9%, ANZ moved up 6.1% and National Australia Bank (the least shorted of the banks) was 5.2% higher.”
RMIT University sessional lecturer Andrew Linden and RMIT senior lecturer in management Warren Staples write that the rhythm of public inquiries and reports has plodded along since financial deregulation in the 1980s, and yet we’re still having scandals, because no reform has gone far enough.
“Commissioner Kenneth Hayne’s 1,000-page final report hasn’t gone far enough to end this cycle. While his referral of 24 misdeeds for possible criminal and civil prosecution will help in righting past wrongs and perhaps focus the minds of directors and executives, the impact will be generational rather than permanent.”
This is an introductory service while we’re building a comprehensive daily paid online publication, coming soon.
We’re not here to offer opinion, simply to cut through the noise, and help you make sense of the emerging policy and market trends you need to be across. We call it pure intel. You can read more about us here.