Some Thoughts on the Terms of Reference for a Royal Commission into the Financial Sector by Ken Grundy

Our organisation is fortunate to have many economically and financially literate people, active in social credit. Thus, we should begin work on a submission to be made to the royal commission into the Financial system, if this ever sees the light of day. At present, Turnbull opposes it, but the Labor party is championing the idea. Back in August Shorten sent a letter to Turnbull outlining some of the terms of reference, or issues, which would need to be examined. These include:

1.    The extent of illegal and unethical practices within Australian financial services.
2.    Do Australian financial services adequately meet their duty of care to customers?
3.    How does the ethical, cultural standards and business practices of Australian financial services impact on the behaviour and practices of these institutions?
4.    Is Australia’s regulatory framework adequate to police illegal and unethical behaviour in the Australian financial services institutions?
5.    How does Australian experience in all of the above compare or contrast to international experience?
6.    Any other relevant issues.

Turnbull is opposed to a royal commission, even on this limited basis, because he thinks it would be too costly and would not help “anyone”! Clearly, if there was evidence of illegal and unethical activities then surely it is the duty of Turnbull, on his watch, to address this.
One would be forgiven for thinking that he is just parroting support for the banks, who hate the idea of a royal commission, perhaps as much as peole renting flats, hate the land lord making regular inspections.

Nevertheless, something is better than nothing and it is a good idea to keep the coals of the debate going as long as possible. So in addition to the Labor Party’s terms of reference we need some more, or at least more explicit particulars.
Here the Greens have done some good work for once, and they have given a more detailed list, which I now freely quote because they are supposed to be representing us: see http://greens.org.au/sites/greens.org.au/files/Royal%20Commission%20-%20ToR.pdf. Their terms are:

“Appoint a commissioner to inquire into the conduct, business practices and culture of banking and insurance entities (relevant entities), with particular regard to:

a) the extent of illegal or unethical conduct within relevant entities, including:

i. any decisions or actions of directors, officers, employees, auditors, actuaries, advisers or agents which would constitute a breach of the law, regulation or professional standards, or which would reasonably be considered unethical;
ii. the knowledge and complicity of directors, officers, senior employees, auditors, actuaries, advisers or agents in any illegal or unethical conduct; and iii. the systemic nature of any illegal or unethical conduct;

b) the duty of care of relevant entities to their customers, including:

i. whether prescribed conduct and business practices are aligned with the duty of care to customers and community standards; and
ii. whether the bounds of legally acceptable conduct and business practices are aligned with the duty of care to customers and community standards;

c) the salary and remuneration structures, promotional opportunities and termination contracts within relevant entities, including:

i. whether the incentives provided encourage illegal or unethical conduct; and
ii. whether the incentives provided are aligned with the duty of care to customers and community standards;

d) the nature of vertically integrated business models, including:

i. the integration of everyday banking, financial planning, wealth management and insurance within a single entity;
ii. whether the incentives provided encourage illegal or unethical conduct; and
iii. whether the incentives provided are aligned with the duty of care to customers;

e) the funding, performance, governance and independence of regulators and dispute resolution bodies, including any real or perceived instances of regulatory capture;

f) the existence of implicit and explicit government guarantees for the business practices of relevant entities, including:

i. whether the cost of the risk covered is adequately borne by relevant entities; and
ii. whether the existence of guarantees impacts upon the conduct, business practices and culture of relevant entities;

g) the impact of the conduct, business practices and culture of relevant entities on:

i. the stability of the financial system; and
ii. the broader economy;

h) the relationship of relevant entities with political parties, including:

i. lobbying activities by relevant entities and any representative bodies; and
ii. donations made by relevant entities to political parties;

j) the adequacy and effectiveness of existing regulation and prudential supervision of banking and insurance at Commonwealth, State and Territory levels in dealing with matters raised in the above paragraphs and, in particular:

i. the availability and value of penalties for instances of illegal or unethical conduct;
ii. the legal protection and compensation available to employees of relevant entities who disclose instances of illegal or unethical conduct; and iii. the means of redress available to customers of relevant entities who suffer detriment as a result of illegal or unethical conduct within relevant entities; and

k) any matter reasonably incidental to a matter mentioned in the above paragraphs.”

In short, the standard terms of reference should deal with the whole range of issues relating to consumer protection, the adequacy of current levels of consumer protection, and the role and performance of regulatory agencies in dealing with illegal and unethical behaviour, and the mechanisms of justice for those harmed by such actions.

The Senate on September 1, 2016, passed a motion for such a royal commission into the misconduct of the banking and financial services industry, although a similar motion was rejected the day before in the House of Representatives: http://australianpolitics.com/2016/09/01/senate-banking-royal-commission-resolution.html. So, at some point this may happen, perhaps when the Liberals lose the next election.

The target for League actionists would be to extend the terms of reference to include an examination of the sustainability of the entire foundations of the orthodox financial system. This is where our social credit family may like to get active, and add some ideas to toss into the debate. I would suggest that a good addition would be a firm ruling on the exact nature of credit creation as a debt to the private banking system, and the full economic consequences of this, regarding debt levels and inflation. We could also ask for an evaluation of the original concept of the Commonwealth Bank as the people’s bank, and why there could not be a greater democratisation and decentralisation of money itself. How would a national credit authority operate? These points and many others are currently being discussed at the Social Credit Discussion group here: https://groups.google.com/forum/#!forum/social-credit

It would be a very good time to get those social credit ideas out there.
To do this, it would also be a wise strategy for social creditors to attempt to educate, and lobby entities that support the royal commission.  For example, he idea of money decentralisation is not inconsistent with environmentalism, and even though we disagree with the Greens on most things, maybe here there is common ground. It would be worth a try.

Local currencies have been tried with Green initiatives such as the transition town networks (see https://en.wikipedia.org/wiki/Local_currency ), so alternative local money is not contrary to the general thrust of environmentalism, which is about “thinking local.” If they go this far, then maybe they can go a few steps further.

Let me know what you think and also any good or bad results from your efforts.