Australia’s largest banks will have to face a parliamentary committee for an annual grilling to “drive cultural change”, Prime Minister Malcolm Turnbull said Thursday as he addressed public disquiet about their behaviour.
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One key question they are expected to answer is why they do not pass on in full interest rate cuts by the Reserve Bank of Australia, a key tool wielded by the central bank to boost growth amid global economic turbulence and uneven domestic expansion.
“What this will do is create a regular and permanent method of accountability and transparency for the banks”, says Turnbull. “You’ll appear at least annually”, Mr Turnbull said.
“All I’m saying is, if they don’t pass on rate cuts I’m going to be supremely cross – and if they lead us into another financial crisis I’m going to give them the absolute hardest slap on the wrist that I can muster”.
The government has been under pressure to launch a royal commission into the banks after a series of scandals over the activities of wealth managers, insurance payouts and alleged fixing of the bank bill swap rate.
Mr Morrison insists the Australian Securities and Investments Commission has greater powers than a royal commission to investigate the banks.
“The Federal Government is entitled to call the banks before a parliamentary committee, however no other businesses are required to justify their commercial pricing decisions in this way”, he said.
Malcolm Turnbull has told 3AW, the big banks are different.
Nick Economou, a Melbourne-based professor at Monash University’s School of Political and Social Inquiry, said Turnbull had been hurt during the election campaign by opposition claims he wasn’t being tough enough on the banks.
The Prime Minister has also warned the banks that if they refuse to front up every year to Parliament’s economics committee to account for their actions they will suffer “gigantic” reputational damage.
“There is nothing Mr Turnbull won’t do to protect the big banks from a Royal Commission”.
That means 2.9 per cent of every $100 earned in Australia ends up as bank pre-tax profit, compared to the United States and UK at $1.2 and 90 cents per cent respectively. “This is a friendly catch-up, not an investigation”, Shorten said.
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Michelle Grattan is a professorial fellow at the University of Canberra.
