Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announce a royal commission into the banking sector. Credit:Nick Moir Shadow treasurer Chris Bowen called that inclusion "ideological, juvenile, and needlessly partisan", but the government believes the giant industry funds, which have senior unionists on their boards, provide resources to unions which are then used for political campaigns. The inquiry could look at whether members' money is therefore flowing from super fund savers into activities that are not necesarily in the direct financial interests of those employee members. Some Liberals are privately fuming about the tactics of outspoken Nationals MPs, whom they accuse of cynically exploiting the Prime Minister's vulnerability with two MPs absent and byelections underway. But citing a recent poll that showed two thirds of voters supported a bank inquiry, one Liberal also complained about the delayed timing of the royal commission announcement, which he said had somehow managed to turn a popular decision into a problem.

"Only we could give the voters what they've been calling for, and still make that a vote loser," he complained. Mr Turnbull had argued for almost two years that a royal commission would be a financial bonanza for lawyers but would deliver "absolutely nothing in terms of action" for aggrieved bank customers. He continued to express that disdain even as he announced the probe, describing it as "essentially a regrettable but necessary action". "I mean politics – the banks in particular and financial services sector has become a political football. That is not in the national interest ... it is clear that the speculation and the uncertainty and the politics around this issue require the government to take control of the inquiry issue," he said. The government's change of heart also followed an invitation from the banks themselves, who wrote to the Treasurer on Thursday morning advising that the royal commission they had always opposed should now take place to end damaging "uncertainty".

They are now bracing for a process expected to unearth embarrassing and potentially incriminating emails, and expose banking practices that could range from unethical to illegal. Mr Turnbull and Treasurer Scott Morrison openly admitted the royal commission, which has been given a short 12-month duration and a budget of $75 million, was not needed in a policy sense, but resisting it had become more damaging to confidence than allowing it to proceed. "This will not be an open-ended commission, it will not put capitalism on trial, as some people in the Parliament prefer, and we'll give it a reporting date of 12 months," Mr Turnbull said. A government source said senior economic ministers had decided it could not hold out any longer once the Greens fell in behind a bill by Nationals senator, Barry O'Sullivan. Fellow Nationals backbenchers George Christensen and Llew O'Brien had stated their intention to cross the floor in the House of Representatives to support that bill.

Nationals senator John "Wacka" Williams said he was very proud of the work done by Senator O'Sullivan and others to make the inquiry happen. He said their actions had "made it very difficult for the Prime Minister, I'd imagine" but were necessary. In June, the Prime Minister had told an Adelaide radio station that problems such as those identified within the insurance arms in the banks would be unresolved by an expensive royal commission. "A royal commission won't address any of those issues," Mr Turnbull had told 5AA. "A royal commission would result in years of delay, enormous expense – the legal profession I guess would do very well out of it – but there would be absolutely nothing in terms of action."

Mr Morrison said the nature of political events meant continued resistance was no longer wise.



"Politics is doing damage to our banking and financial system, and we are taking control as a government to protect the strength of our banking system through a properly constituted inquiry on these terms of reference, rather than the alternatives present in other commission of inquiry proposals, subject to the vagaries of politics that would do harm and already has to date." Labor immediately called for the government to consult on the terms of reference, with Opposition Leader Bill Shorten accusing Mr Turnbull of losing control of the Parliament. Mr Christensen welcomed the backflip but asked why Mr Turnbull had been dragged "kicking and screaming" to the inquiry rather than accepting much earlier that one was necessary. The Australian Bankers Association, headed by former Labor premier Anna Bligh, cautiously welcomed the inquiry. "All banks believe that a lengthy, $75 million royal commission is unwarranted and fails to recognise that Australian banks are already changing, currently undergoing the largest reform program in decades. However, the continued political turmoil and uncertainty presented an unacceptable risk to the stability of our system, the reputation of our banks and the interests of our customers, employees and shareholders," it said via a statement.



WHERE IT ALL BEGAN 2013 June 18 Fairfax reveals CBA was aware of forgery allegations against Ricky David Gillespie for nine months before his 2009 resignation. June 20 Senate launches inquiry into ASIC. Fairfax obtains copy of Macquarie Group's 'Penske File' – a cheat sheet containing answers to exams its advisers must take annually.

2014 June 27 Senate inquiry calls for royal commission into CBA. July 3 CBA announces compensation scheme for financial planning victims involved with bank between 2003-2012. August 15 ASIC warns Macquarie it will impose new licence conditions if the investment company fails to adequately deal with customers of dodgy advice. October 24 Finance Minister Mathias Cormann rejects royal commission, announces national register for planners.

2015 October 29 CBA whistleblower Russell Phillips tells Senate hearing the bank's compensation scheme is a joke. 2016 March 4 ASIC sues ANZ for rate rigging March 5 Joint Fairfax Media and Four Corners investigation finds CommInsure acted unethically in areas such as processing life insurance and payouts for the terminally ill.

March Assistant Treasurer Kelly O'Dwyer says inquiry into financial advice will expand into insurance industry. April 5 ASIC also launches legal action against Westpac for rate rigging. April 6 Malcolm Turnbull attends Westpac party, lashes banks over "troubling incidents". April 8 Bill Shorten promises royal commission if Labor gains power. April 20 Government reforms mean banks will cough up $121 million to boost ASIC.

May 5 Inquiry report released, concludes that the banks might not have acted illegally, but did behave "unconscionably". May 21 Report reveals planner Inderesan 'Pullen' Pillay cost 300 clients $70 million. June 7 ASIC launches legal action against NAB for rate rigging, following claims against ANZ and Westpac. August 4 Turnbull says bank CEOs to be called before economics committee annually. October Bank CEOs grilled in Canberra.

October 27 ASIC report: Almost 200,000 customers systemically rorted of an estimated $178 million for advice never received. 2017 August 3 Austrac launches legal action alleging CBA failed to comply with law on more than 50,000 occasions. August 28 APRA announces unprecedented public inquiry

into CBA. September 14 Government to set up mega ombudsman to stave off royal commission.

September 21 CBA sells CommInsure, books massive writedown. October ANZ and NAB settle cases with ASIC, Westpac fights on alone.