Banking Commission of Inquiry Bill 2016 (CTH): New Royal Commission Proposed

Tuesday 11 October 2016 @ 1.43 p.m. | Corporate & Regulatory | Trade & Commerce

In August 2016, the Prime Minister announced the appearance of the major four banks in front of the Senate Standing Committee on Economics. This was followed by yesterday's (10 October 2016) introduction of the Private Member's Banking Commission of Inquiry Bill 2016 (The Bill) in response to specific issues not addressed by the Standing Committee.

Purpose of the Bill

As stated in the Explanatory Memorandum, the Bill seeks to establish and Banking Commission of Inquiry. It will hold the same powers as a Royal Commission. A Commissioner will be appointed by the Treasurer to conduct the enquiry.

The Terms of Reference will address the following items:

  1. ADIs not passing on full cuts to the cash rate to the customer,
  2. ADIs home loan practices in relation to:
    1. lending where the margins are excessive,
    2. entering into home loans under which the ADI may recover more than the value of the secured property;
    3. making loans that the borrower could not reasonably be expected to service; and
    4. ADIs “selling on” loan debt contacts and agreements to outside entities.
  3. The culture of remuneration for ADI directors and managers.
  4. The legislative adoption and practice of non-recourse lending and its implications,
  5. The legislative regulation of mortgage insurance,
  6. The establishment of a tribunal with the critical powers needed as follows:
    1. oversight and ensure prudential and responsible behaviour by ADIs and their directors, senior managers and staff; and
    2. provide Legal Aid to parties injured or potentially injured.

The Bill also proposes that the Commission not be bound by the usual rules of evidence.

Reaction to the Results from the Banking Inquiry

According to the SBS, Nationals senator John Williams was unimpressed at how lower house MPs handled the chief executives of the nation's big four banks in last week's banking inquiry:

"I don't think they laid a blow on the banks, to be frank... it was about as exciting as watching paint dry."

He supports the introduction of the Private Member, Bob Katter's, Bill, in order to circumvent the need for Federal government approval for a banking royal commission.

Former treasurer Wayne Swan also believes the boards, not just the CEOs, of ANZ, Commonwealth Bank, National Australia Bank and Westpac should have to front a parliamentary committee:

This also comes on the back of supposed communications, according to the Guardian, between Labour Minister Bill Shorten and the Prime Minister in August 2016, detailing that the following should be covered in a proposed Royal Commission:

1. How widespread instances of illegal and unethical behaviour are within Australia’s financial services industry;

2. How Australia’s financial services institutions treat their duty of care to their customers;

3. How the culture, ethical standards and business structures of Australian financial services institutions affect the behaviour of these institutions;

4. Whether Australia’s regulators are really equipped to identify and prevent illegal and unethical behaviour;

5. Comparable international experience with similar financial services industry misconduct and best practice responses to those incidents; and

6. And other events as may come to light in the course of investigating the above.

The Private Member's Bill is awaiting Second Reading debate in the House of Representatives.

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Banking Commission of Inquiry Bill 2016 [CTH] and secondary materials as reproduced on TimeBase LawOne article

Guardian Article

SBS Article

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