Managing the Legal Environment

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Managing the Legal
Environment

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Answer 1
The “Royal Commission into Misconduct in the Banking, Superannuation
and Financial Services Industry”, also known as the “Banking Royal
Commission” and the “Hayne Royal Commission”, was established in
2017, on 14th December. This was established by the Australian
government based on the guidelines given under the “Royal Commissions
Act 1902” (O’Brien, 2019). The global negative impact of the banking and
financial sector was an indication for the establishment of the royal
commission which created a pressure on the federal government to make
sure that necessary actions are taken in order to reduce their implications.
The number of cases involving banking organisations that engage in
illegal and immoral practices was increasing rapidly in Australia that was
negatively affecting the economy and the interest of the customers
(Balzer, 2018).
Many major frauds involving banking and financial organisations such as
the account fraud scandal involving Wells Fargo, a US-based bank,
resulted in contributing to the global financial crisis in 2008 (Ferguson,
Masters & Chistodoulou, 2014). Fairfax journalists along with ABC TV Four
Corners exposed one of the leading banks of Australia in 2014; in this
broadcast, they exposed the “sales-driven culture” which was adopted by
the Commonwealth Bank (CBA) in order to make sure that the company
generates profits at all costs (Ferguson, Masters & Chistodoulou, 2014). In
this fraud scandal, CBA customers lost millions of dollars. The National
Australia Bank (NAB) was also involved in a series of finance related
scandals in 2015 where the company was enforced to pay millions in
compensations which were revealed by a whistle-blower. Along with these
scandals, the federal government of Australia was under public pressure
which includes parties such as labours, whistle-blowers, the Greens,
consumer groups, national MPs and others in order to establish a royal
commission for the banking and financial sector (Balzer, 2018). These
parties were holding protests and creating pressure on the federal

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government to make sure that they take corrective measures which lead
to the establishment of the royal commission.
Answer 2
There were many reasons given by the federal government against
establishing a royal commission in banking and finance sector, which
resulted in causing a delay in establishment of this commission. One of
the key arguments was that there is already adequate number of
committees, regulators and enquiries, which are established in this sector
in order to govern the actions of organisations (Hanrahan, 2019). Some
examples include “Australian Securities & Investments Commission
(ASIC)”, “Reserve Bank of Australia (RBA)”, “Australian Competition and
Consumer Commission (ACCC)” and others. Another key argument was
that banks have different stakeholders, and this becomes difficult for
them to maintain a balance between their interests. The federal
government argued that the media is bashing banks for their actions and
unnecessarily highlighting them to generate more views. The leading
banks of Australia such as CBA, NAB, and others reported high profits and
majority of their customers were satisfied from their services, most of the
leading banks were conducting their operations while complying with
regulatory guidelines imposed by the federal government which did not
raise any concerns to establish a royal commission in this sector (Balzer,
2018).
Furthermore, the economic growth of Australia heavily relied on the
banking sector, and the performance of four major banking organizations
and the federal government assumed that establishing the royal
commission would result in reducing their profits that will likely to have an
adverse impact on economic growth of the country (Atkins & Charlton,
2019). The decision of establishing the royal commission would also result
in increasing the national spending since as per estimation, establishing a
commission for two years would have cost around $50 million. There was
also uncertainty regarding the goals that will be achieved by this royal