Monash Retail Commercial Bank

Introduction

The Australian government established the Royal Commission to inquire the Australian banking, superannuation and financial services industry on 14 December of 2017. This movement brought up various opinions, some people believe this is the right thing to do, and it is the time to punish banks’ misbehaviours. However, other people concern that this investigation will create drawbacks, such as uncertainty and damage to reputation of Australian economy. In this paper, both pros and cons about the inquiry are discussed in the first place. Then, the incidents which reported by the Monash Retail Commercial Bank (MRCB) in the initial inquiries are also been analysed as following. Last but not the least, according to the discussion about the investigation of the Banking Royal Commission as well as the reports of MRCB, some recommendations are provided to MRCB restore customers’ trust in banking industry.

Pros and cons of inquiry into the finance industry

Banking industry is one of the most significant support of the Australian economy. During the past decade, there were number of sandals about banks’ misconduct that enough to disappoint the public. Those sandals including money stealing, the bank bill swap rate (BBSW) manipulation and various delinquencies what make people raise the trust issues toward the banking system in Australia. One of the biggest sandals in Australian banking history comes from the Australia and New Zealand Banking Group (ANZ), which was subject to tampering the BBSW rate (Shapiro, 2016).  Jonathan Shapiro, from the Financial Review reported that seven traders from the ANZ were suspended after the investigation which operated by the Australian Securities and Investments Commission (ASIC) since 2012 (2016). The government of Australia cannot ignore any more misbehaviours of banking sector. It announced the establishment of a royal commission into the banking, superannuation and financial services industry in December 2017. The royal commissions are public inquiries under the Parliament Act to ensure financial system in Australia is working efficiently and effectively by launching an investigation into the illegal practices in both banking and financial services (Treasury, 2017). However, the establishment of the Royal Banking Commission brings both pros and cons which are discussed in following content.

What are the benefits of establish the Royal Commission? The misconducts of banks and the suspicions raised by the public are destroying the reputation of Australian banking sector. Leo D'Angelo Fisher, an analysist from the Newdaily states that Australian’s biggest financial institutions are too big to be managed by themselves and controlled by the Australian regulation systems. The commission confirms that the big four banks are ‘a bloated, uncompetitive and untrustworthy government-sanctioned oligopoly’ (Fisher, 2018). In March of 2018, NAB staff was accused for accepting bribes to push through irresponsible lending practices and credit card debt which has caused a debt-burdened family almost to lose their home (Carey, 2018); this is just a tip of the iceberg, the commission has received 1894 submissions on banks’ misconduct in household lending and mortgages. The commission has exposed the type and scale of banks’ misconducts, and laid the foundation for reregulating banking industry. Secondly, the investigation encourages banks to behave in accordance with the regulations and the highest moral code. An article which authorised by George Christensen MP states that the Royal commission inquired the conducts of banks and their lawyers, including withholding evidences, forging signatures and documents and wearing false affidavits for making sure it will correct the “mistakes” of banks fairly with efficiency (Bank Inquiry, 2018).

Thirdly, the government authorised this investigating in the Australian financial system for deliver a fair answer to the public, as well as to show diligence and responsibility of Australian government to overseas’ investors. The latest estimates by Alan Kirkland, the Choice Chief executive showed that $216 million has been stolen from more than 300 thousand Australian clients by financial advisors for not providing services after charging fees (The guardian, 2018). One of the benefits of strictly investigating banks’ improper conduct as soon as possible, is to compensate clients who suffered economic losses sooner and also to punish the banks who neglect their duties.

What about the drawbacks of setting up the banking Royal Commission? Banking industry is regulated by both global and domestic regulators. Banks in Australia are monitored and oversight by the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC) as well as the Australian Competition and Consumer Commission (ACCC) and the Reserve Bank of Australia (RBA). Also, there are various government bodies are supervising Australian banking sector, such as the Banking Ombudsman. Too many bank supervision mechanisms cannot effectively eliminate banks’ misconducts, but consume limited both human and financial resources. The cost of a royal commission needs to be operated for at least two years which requires a rough estimates budge of $50 million (Hand, 2016).

In addition, the commission is going to create a new set of regulations to restore the trust from the public and reverse the bad reputation of Australian banks. However, the regulations that the commission will not only be directed against banks, such as new taxes on banks and new limit on lending what will bring side effects to consumers. Graph 1 shows that Australian large banks are in a leading position in the world. Those regulations which made by government rather than competitive forces will curb the development of banks. Unfairly, Taxpayers will be the one who pay for the bank’s misconducts. Excessive influence on banks’ profit will not contribute to the national economy. Furthermore, the capitals of banks in a nation are the cushions for the country in economic crisis, without those capitals, a nation would be more turbulent than others.

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Lastly, Thorough investigation of Australian banks is a positive action, but it will also expose all problems to the public. The consequence of establishing banking royal commission has two extremes. Will the public have greater confidence and hope for the future banking industry? Or, the public continues to suspect that the misbehaving culture of Australian banks will be spreading in secret and choose overseas banks or other financial activities. This uncertainty will bring a storm in Australian banking sector, what will not only affect banks and financial institutions, but various industries and households because the whole Australia relates to finance.