BERLIN — Malcolm Turnbull has conceded that his refusal to call a banking royal commission two years ago was a political error but maintains the government was putting customers first by getting on with introducing new rules and regulations to clean up the sector, rather than have an inquiry first.
As his government flails about back home amid criticisms it should have called a royal commission earlier given the scandals now being unearthed, Mr Turnbull said the government was already aware of the deep cultural problems within the banks and saw the need to act as a greater priority.
He pointed to his April 6, 2016 speech to a Westpac lunch in which he blasted the sector for its cultural failings and warned the banks risked their social licence if they did not clean up their act and put customers first.
“I called out the unacceptable behaviour of the banks and how there had been a failure to put customers first and that culture of the financial services sector was not delivering on (its) fundamental fiduciary obligation to put the customer first,” he told reporters in Berlin.
It was that speech that gave Labor the green light to call for a royal commission but the government baulked and instead set about ushering in new rules, regulations and powers to clean up the sector.
The government only called a royal commission late last year after rebel Nationals backbenchers forced its hand.
“Politically, all of the political commentators are right when they say we would have been better off setting one up earlier,” Mr Turnbull said.
‘Less political grief’
“But, as it’s turned out, I think we’ve put customers first, we’ve put substantial reforms first and we’ve got a lot of legislation and reforms passed already that would not have been able to be done had the royal commission been set up two years ago.
“My assessment was the government needed to take action and get on with the job immediately and that’s what we have done.
“The government would have had less political grief if it had set up a royal commission two years ago, you’re right about that clearly with the benefit of hindsight.”
The reforms already undertaken by the government over the past two years include greater powers and resources for the regulators, the introduction of Banking Executive Accountability Regime, minimum annual grilling of bank bosses by Parliament’s House Economics Committee, stiffer fines and jail terms for breaches of the Corporations Act, and a one-stop shop complaints mechanism for customers.
Mr Turnbull said if the Hayne Royal Commission found any of these inadequate or in need of change, the government would act.
“Now we have a royal commission which has got much wider terms of reference than had it been set up two years ago and the ability under the terms of reference to consider the reforms we have got in place and give us advice as to how they can be improved.”
The saga has cost the government hard-won Senate support for its company tax cuts. One Nation now says it will not support the legislation unless the banks are exempted and their tax cut is used to compensate victims. Mr Turnbull said the terms of reference for the inquiry include a consideration of compensation.
Politically, however, the government is so far unscathed with the latest Newspoll published Monday showing it trailing Labor by just 51 per cent to 49 per cent.
“The political contest in Australia is very close,” he said.
He rejected any suggestion the government had been protecting the banks by resisting a royal commission.
“I made the call and I take responsibility for making the call to put action and reform and legislation first.
“We knew what the problem was.
“The choice was to put customers right at the forefront of our focus and say ‘right, we know what the problem is, we don’t know every case of wrongdoing and we never will.’
“But what we did know is that banks and other financial institutions had not been putting customers first and so the course of action I followed was one of substantial reform.”
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.