THE HON MARK DREYFUS QC MP
SHADOW MINISTER FOR THE ARTS
MEMBER FOR ISAACS
THE ONLY WAY TO LEARN THE TRUE HEALTH OF OUR FINANCIAL SERVICES INDUSTRY
Royal Commissions are one of the most powerful instruments of executive government, with great resources at their disposal and significant coercive powers to inquire and to interrogate individuals.
For this reason Royal Commissions are not to be used lightly.
Throughout Australian history Royal Commissions have been used to uncover some of the most shocking instances of corruption, abuse of power and criminal misconduct at both the state and federal levels, and many have made recommendations for major reforms.
I have been personally involved as a barrister in eight separate Royal Commissions, so I know the weight they carry.
One of these was the Victorian Royal Commission into the collapse of the Tricontinental investment bank in the late 1980s and early 1990s. Back then I saw first-hand how risky and reckless behaviour by a financial institution - even a state-owned one - can cause massive financial losses and have grave impact on the people caught up in that behaviour.
Since I stood up last week with Labor leader Bill Shorten and my colleagues Chris Bowen and Jim Chalmers to announce that we will hold a Royal Commission into the financial services sector, much has been said about the difference in powers of a Royal Commission and existing bodies like the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA).
The government is trying to claim there is no need for a Royal Commission because ASIC is already doing that job. This is a fundamental misunderstanding of the role of Royal Commissions, and indeed of ASIC. The reason Royal Commissions exist is to look at a particular issue, or system, as a whole.
Put simply -- ASIC considers whether the laws are being followed; a Royal Commission considers whether the laws are adequate in the first place. Royal Commissions are not for pursuing individual rotten apples, but for examining the health of the tree.
Take the current Royal Commission into child sexual abuse as an example, which may help to illustrate the differences. Of course, the police already have the ability to investigate individual cases of suspected abuse and can charge perpetrators with criminal offenses (although, due to obfuscation or deliberate concealment, they often did not).
But the point of calling a Royal Commission into this serious matter was to go beyond individual cases and to look for broader patterns which might explain how such a widespread problem came about and what can be done to ensure it never happens again.
It is a similar principle of difference when looking at the financial services sector and the existing bodies regulating it.
Both ASIC and APRA can only exercise their powers when individual cases are brought before them, and after alleged crimes have already occurred.
But they cannot consider the much more important question that so many Australians are asking -- if the financial sector is so well regulated, why does scandal after scandal keep happening? What is it about the Australian financial sector as a whole that is causing this, and what can be done to stop it?
Without needing to limit investigations to individual issues, a Royal Commission can draw from a wider pool of witnesses and evidence, to proactively look for root causes, rather than simply trying to determine if there is enough evidence to get a prosecution.
There are plenty in the government who appreciate that the time has come for a Royal Commission -- eight of its own MPs and Senators have already spoken out.
In a cruel irony, the government is claiming that ASIC can do the work of a Royal Commission, while it has gutted ASIC's funding and capacity to do its current job properly. The Abbott government's $120 million cut in the 2014 budget has resulted in a 12 percent reduction in ASIC's staff.
Having responded to financial sector scandals by slashing ASIC's resources, for the Government to now claim that ASIC can also do the job of a Royal Commission is insulting to its hard-working staff and to the intelligence of the Australian community.
ASIC and APRA regulate and enforce our laws. Only a Royal Commission can examine whether existing laws are adequate and whether the regulators have the powers and resources they need to address the systemic problems that are so clearly evident in our financial system, and to suggest steps to restore the public's trust in our financial sector.
This piece was published on The Huffington Post on Friday, 15 April 2016.