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Issue #1810      February 14, 2018

Banks Royal Commission

The bastards after your super

The main target of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industries is the retail superannuation sector which the banks have their eyes on. The terms of reference drafted by the big four banks are designed to produce a whitewash of the corruption, fraud, malpractices and other misconduct by banks and insurance companies.

This is the Royal Commission the banks will be happy to have.

Former High Court judge Kenneth Hayne has been appointed as Commissioner and given a budget of $75 million. Its first public hearing was held in Melbourne this past Monday, February 12.

The Royal Commission was announced out of the blue by the Prime Minister on November 15, 2017. It was set up a month later. The banks, insurance companies and industry advocates were immediately invited to make submissions. The public, the victims of their malpractices, are still waiting to hear if and how they can make submissions.

The Prime Minister’s sudden turnaround came after months of strenuously resisting mounting public and Opposition pressure for a Royal Commission. He was faced with several backbench National Party MPs who were threatening to cross the floor in Parliament and support a bill which would have had far stronger terms of reference.

The big banks were extremely concerned that they would be faced with a genuine inquiry if the bill was passed. They turned up on Turnbull’s doorstep with draft terms of reference for a Royal Commission designed to do minimal damage to their reputations and permit business as usual.

Rorting banks

Families and small businesses are subjected to huge banking fees and charges. The profits of the Big Four Banks continue to soar, hitting a total of more than $30 billion last year.

We have seen a string of scandals and rip-offs and rorts costing many Australians their homes, retirement savings and businesses and even facilitating the laundering of drug money.

The Royal Commission has been given very wide scope to pick and choose what it inquires into, but it is not required to inquire into “a particular matter to the extent that the matter relates to macro-prudential policy and regulation.”

Macro-prudential policy and regulation is defined as “policy and regulation including as to the structure, role and purpose of financial regulators, that is concerned with containing systemic risk, which have widespread implications for the financial system as a whole.”

It is also not required to inquire into matters that are being or will be dealt with by another inquiry or a criminal civil proceeding. That would appear to rule out much of the serious fraud and other misconduct by banks and insurance companies.

In effect these provisions rule out recommendations for tough regulation of the financial sector, gutting the Commission of its potential to recommend real change to protect clients.


The banks also took the opportunity to include superannuation in the terms of reference, the target being the industry superannuation funds that outperform the retail and corporate funds by miles. There had been no suggestion of misconduct by industry funds, let alone a campaign for a Royal Commission into them.

There have, however, been complaints about the retail, for-profit superannuation funds that are run by the big banks and insurance companies. Not only do they charge higher fees and make smaller average returns for workers on their investments, but their conduct has left a lot to be desired on occasions.

For example, the ANZ’s superannuation fund Prime Access was forced to refund millions of dollars of fees charged for services not supplied to its members.

Retail super funds are soaking up half of all fees in the superannuation system despite holding only 29 percent of retirement savings, according to research carried out by Rainmaker for Industry Super Australia. But that is not all the private, for-profit sector pockets.

It is even worse than that. Of that $31 billion in fees, the for-profit sector (which also includes self-managed super funds) ends up with $28 billion, or 91 percent, Rainmaker found.

That is because, while the not-for-profit sector (including industry, public sector and corporate funds) charged a total of $12.7 billion in fees, $9.9 billion of that went to private sector wealth managers to provide insurance and fund management services.

The not-for-profit sector kept only $2.8 billion.

Industry funds do more than just offer superannuation products. CBus, for example, which is specifically tailored to workers in the building and construction industry, offers insurance products to cover Death and Total and Permanent Disablement, income protection, etc. The premiums are paid out of the super fund and are cheaper than the for-profit-insurance companies.

Its investments have resulted in the creation of thousands of jobs in the industry.

The average return per annum over the last 33 years is 9.4 percent.

Clause (c) of the Royal Commission terms of reference states: “whether the use by financial services entities of superannuation members’ savings, for any purpose, does not meet community standards and expectations or is otherwise not in the best interests of those members”.

So, what are the “best interest of members”? Is ethical investment considered as not meeting their best interests because it might not make the highest returns? Would offering additional insurance products or investing as does Cbus in the building and construction industry be considered not in their best interests?

The terms of reference, drafted by the banks, not surprisingly offer the financial sector considerable scope to attack industry superannuation funds, despite their superior performance.

The banks and insurance companies have been pushing to gain control of these funds for decades. The Howard Coalition government introduced reforms in 2004 requiring an employer to deposit compulsory superannuation payments in the fund of each employee’s choice, in the hope that there would be a mass exodus from industry funds. Nothing of the sort happened. Workers were not duped.

The boards of industry funds have equal employer and union representation. Enterprise agreements often specify default industry superannuation funds. The private, for-profit sector wish to reduce union representation to a small minority and have their own representatives in control.

They also want default funds removed from enterprise agreements.

The Commission is authorised to issue an interim report by September 30 this year and the deadline for its final report is February 1, 2019. Members of the public are invited to make submissions but must use the special form supplied by the Commission. Copies of this form are on their website. (See below.)

Home page:
Link to form:

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