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Banks remain protected species

  • 04 February 2019


Kenneth Hayne's royal commission into the financial sector has named, shamed and excoriated banks, regulators, insurance companies and other financial services businesses to the extent that you would think they are now extremely vulnerable and universally unloved. That would be a mistake.

None of this recent history changes the fact that the big banks are a protected species. Unlike many other major institutions subject to royal commission enquiries recently, including trade unions, churches, and the aged care industry, they are insulated from the most drastic government action.

Banks have a lot going for them in conventional terms, including making large political donations, using professional lobbying and maintaining influential networks, but that is ultimately not enough to protect them. Their power stems from the pivotal place they occupy in the economy. This makes them the best example there is of the power of business in politics.

What is good for the big banks is reputedly good for the economy. That is why they were protected by being given special status during the Global Financial Crisis. That is why it was so hard to bring them to account by calling a royal commission. It took several years of hard political struggle despite a crescendo of across-the-board criticism before the royal commission was eventually called by the Turnbull government against its wishes.

Labor will never stop reminding Scott Morrison, then Treasurer, that he voted against holding a royal commission 26 times. Even then the royal commission was time limited to about a year, compared to the five years for the Institutional Responses to Child Sexual Abuse RC, in a way which helped to restrict the time available to hear from those 'survivors' damaged by bank mistreatment. There could have been even more emotion generated than there was by revelations of greed, ineptitude and fees for no service.

This is the context in which the Hayne Report was released on Monday. It means that speculation that the banking industry is 'about to change forever' is probably mistaken. There has been too much talk of the industry 'bracing' itself. Yet already there have been warnings to the political class from commentators that this industry is so important that politics must be put aside in dealing with the report.

The ball is now in the hands of the government and the opposition as an election looms and a change of government is likely. Already several themes have emerged. One is the financial