The federal government will launch a royal commission into banks and the financial sector claiming there was “a sense of inevitability” about an inquiry as a “regrettable but necessary” step.
Prime Minister Malcolm Turnbull announced the decision on Thursday, which came as a backflip after Australia’s big four banks called on the government to establish the inquiry to end uncertainty in the sector.
“The speculation about the inquiry cannot go on,” Mr Turnbull said.
“It’s moving into dangerous territory where some of the proposals being put forward have the potential, seriously, to damage some of our most important institutions.”
When asked if it was a backflip, Mr Turnbull said “a government’s policy remains the same until it is changed.”
“The political environment has created a sense of inevitability about an inquiry…We have to act in the national interest, protesting Australia’s economic future.”
The commission will run for 12 months with a final report due by February 1, 2019.
CEOs and chairmen of Commonwealth Bank, Westpac, National Australia Bank and ANZ sent a letter to treasurer Scott Morrison on Thursday, asking for a “properly constituted inquiry into the financial services sector” because “it is now in the national interest for the political uncertainty to end.”
The banks asked for an inquiry with terms of reference “free of political influence” and sufficient scope to address community concerns.
The commission came following ongoing pressure on the coalition government from Labor, some rebel Nationals MPs and the Greens to establish a royal commission into the banks following a number of life insurance and financial planning scandals.
Banks have consistently argued against further inquiries including a royal commission into the sector, calling them “unwarranted” because of costs and they were a distraction.
However, they said in the email in light of recent speculation, it was now “imperative” for the government to act decisively to deliver certainty to the sector, bank customers and the community.
“It is hurting confidence in our financial services system, including in offshore markets, and diminished trust and respect for our sector and people. It also risks undermining the critical perception that our banks are unquestionably strong.”
“We now ask you and your government to act to ensure a properly constituted inquiry into the financial services sector is established to put an end to the uncertainty and restore trust, respect and confidence.”
Mr Turnbull has repeatedly denied a need for a royal commission but Nationals senator Barry O’Sullivan believed he had the numbers to go ahead without cabinet approval in a move that could have destabilised the government.
Opposition leader Bill Shorten said Mr Turnbull had spent 601 days fighting Labor’s calls for a royal commission into the banking and financial sector.
“It says everything about Turnbull’s values and priorities that he only agreed to Labor’s royal commission when the banks told him he had to,” he said in a statement.
“He ignored the pleas of families and small businesses, he rejected the word of whistle-blowers. But when the big banks wrote him a letter, he folded the same day.”
“Turnbull has always been – and always will be – on the side of the banks.”