Royal Commission: Investigating Misconduct in the Banking and Financial Services Industry

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ROYAL COMMISSION
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Royal Commission
Introduction
The royal commission is a body created by the government that helps in advising on
matters of great importance in the finance sector. This agency is given powers to operate by
the letters of patent. The royal commission operates typically just as the commission of
inquiry in solving issues that are usually controversial in the economic world, how the
minorities are treated and other events of great importance to the general public. Corruption
is another field which can be dealt with by the Royal Commission. The members of the royal
commission are notable figures in the society with an outstanding experience on matters
concerning the public.
Background and Purpose of Royal Commission
The royal commission into the banking and finance sectors was commissioned in the
year 2017 to check on the misconduct in superannuation, banking and financial services
industry. The Royal Commission act of 1902 gives the government the mandate to create a
commission of inquiry in case of such matters. A letter of patent was issued appointing the
commissioner and the commission’s terms of reference. Justice Kenneth Hayne was
appointed as the new chair to the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry. Other members of the commission include
Mark Costello, Eloise Dias, Rowena Orr, Albert Dinelli and Michael Hodge. They have the
mandate to summon witnesses, interrogate them and even seize documents as evidence. After
their investigations, the members draft a report and presents their findings and
recommendation to the governments for actions. The government can enact some of the
proposals submitted in the in the report. The final report is due on 1 February 2019.

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The corporate governance in the banking industry is usually different from the
management of other corporations. The banking industry has special credits and liquidity
functions which makes it different from other business corporations. The bank regulatory
authorities assert that the top management of banking corporations are solely responsible for
the success and failure of the banking sector. Bank regulatory authority have additional
managerial and supervision on the directors so that they can not only focus on the
requirements of the shareholders but also on the interest of stakeholders (Abella, 2010 pg.68).
This has brought the success of corporate governance in the banking institution of Australia.
The purpose of the royal commission is to provide to the government the reports on
the misconduct in the financial institution. The commission investigates the allegation of
corruption and self-interest of the directors of the banking institution in Australia. In recent
years, politicians in cooperation with the directors have embezzled and misappropriated
millions of dollars for their benefit. The commission is mandated to find out whether the
misconduct is real or not. The commission presented an interim report on 28 September 2018,
but the final report is to be submitted on 1 February 2019. The public opinion is taken
seriously and will be useful when making the final recommendations of the report.
The main reason for calling the Royal Commission is to investigate the misconduct in
the banking sector. The public had lost faith in the financial industry, and therefore a
commission was necessary to find out why and how to resolve the issue. The commission
conducts a public hearing to listen to the views of the citizens concerning the financial sectors
(Robertson 2012, p12). The commission also conducts their investigations in a place where
there are corruption allegations. They have the mandate to interrogate witnesses and even
seize documents to be used as evidence. Despite the great achievement of the royal
commission, it received a lot of resistance and opposition from some members. The Prime

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Minister, Mr Turnbull was among the people who was opposed to the commissioning of the
Royal Commission on Banking and financial sectors.
The resistance of the Royal Commission was from the government itself and the
major shareholders in the big banks in Australia. Two years ago, the government led by
Prime Minister Turnbull could not establish the Royal Commission for their interest and
reasons. The royal commission could expose all the corruption and embezzlement of money
by politicians in the country (Mackintosh 2008, pg.12). The scandals involving the financial
institutions right now could have been avoided two years ago if the commission was
established earlier on. The treasurer, Scott Morrison, also resisted the establishment of the
royal commission despite getting a lot of pressure from the public. However, in 2017, the
government had received an immense pressure from the opposition and the public to appoint
commissioners and had authority to investigate the misconduct in banking.
Corporate Culture and Findings of the commission
Findings of the Commission
On 30 September 2018, the Royal commission presented an interim report on their
findings and recommendation concerning the mismanagement and the malpractices in the
banking sector. The National Australia Bank (NAB) in 2015 had a series of scandals
concerning financial planning. The commission found out that the bank paid millions of
dollars to clients in compensation of their shares, this was considered inappropriate. National
Australian Bank was accused of impropriety in foreign exchange trading. The bank is
accused of paying the wrong clients which led to the loss of millions of dollars fraudulently.
Westpac Banking Corporation was also accused of rigging Australia’s key interest rates. The
commission found out that the corporations were using an automated process in deciding the
people who have met mortgages lending criteria. The computerised method left out the needy