There is now a heated debate over the need for a royal commission into banking and financial services, with the government continuing to defend its controversial inquiry into trade union corruption while rejecting moves by Labor and the Greens, backed by two-thirds of voters, for a comprehensive look into the murky world of money-lenders.

Just how compelling their case is was revealed on 29th April by The Guardian, which listed fifty-seven major Australian banking scandals since March 2009, most involving serious fraud or gross mistreatment of their own clients. ( Timeline: banking scandals in Australia since 2009 ) This is a sample:

In March and April 2016 ASIC began legal proceedings in the Federal Court against the ANZ and Westpac respectively for ‘unconscionable conduct and market manipulation’ in setting the bank bill swap reference rate (BBSW) during the period 2010 to 2012.

On April 15, 2015 Adele Ferguson wrote in the Age that NAB needed to investigate the bank’s culture after its British banks were fined a record $38.8 million for falsifying records and “inappropriate policies” to short-change purchasers of bank products. This followed an earlier damning parliamentary report into the mis-selling of ‘tailored business loans’.

In September 2012 ASIC announced its actions had forced the CBA to pay $136 million to customers for losses suffered on investments through Storm Financial. This was in addition to the $132 million CBA had paid out under its Resolution Scheme.

They also include the revelation that CommInsure, the Commonwealth Bank’s insurance arm, used unscrupulous practices to avoid claims, relying on an outdated definition of a heart attack to deny recovery for trauma. Its former Chief Medical Officer has revealed that doctors were pressured to rewrite medical opinions to avoid payouts.

The flaws in the government’s case

While the government argues that these problems can be dealt with by ASIC- which it has recently ‘beefed up’ with more power and resources – Labor and the Greens insist on a royal commission. Their concerns were highlighted by the ABC’s Four Corners, which aired stories of sick and dying CommInsure policy holders.

The problem with the government’s case is that ASIC, which in 1991 replaced the separate state corporate regulators, was set up to “enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors”. It seeks to enforce the law by gathering evidence from witnesses, including those close to perpetrators. This requires confidentiality and perhaps covert operations; it has to protect witnesses and prevent suspects destroying evidence. The primary aim is to investigate criminal behaviour and enforce the law.

By contrast a royal commission is a comprehensive public inquiry to determine whether, after hearing submissions from concerned members of the public, there is a major social problem which has not been responsive to the ordinary processes of government, including its regulatory and policing agencies. It may call for ‘beefing up’ the latter, but it may also find that the law itself needs updating, perhaps with new crimes and harsher penalties.

The ambit of the commission is wider still – it may reveal that public attitudes, perhaps based on ignorance or prejudice, are in part responsible, so that educational programs are needed. It now seems clear that ignorance of the extent of abuse and the nature of victimisation have been major factors in the incidence of violence against women, and that this requires a better understanding of the role of psychological and financial dependence, as well as the need for protection at short notice.

Likewise the royal commission into sexual abuse of children has revealed the full extent of criminal behaviour, as well as the terrible consequences, with drug addiction, depression, crime, suicide and shattered lives.

It also brought out something which is still hard for most people to come to terms with – a seeming indifference to suffering on the part of those in charge – who include distinguished and often high-ranking members of the clergy. The evidence suggests they were driven by a concern to protect the reputation of the institution, be it a public service or a religious organisation.

The Fitzgerald commission into corruption in Queensland, set up by the deputy premier when Bjelke-Peterson was out of the state, was not a royal commission, but exemplifies the kind of systemic problem which calls for a comprehensive response, with a commissioner having the moral authority to ensure adequate terms of reference (Fitzgerald twice had to get extensions) and witnesses protected from threat of law suits. The corruption permeated the police and reached to the cabinet, with the premier charged with perjury and ultimately sacked by his own party.

By contrast, the royal commission into trade unions was always questionable, and difficult to justify on public interest grounds. The evidence pointed not to a corrupt system, but a failure to enforce the law, in part due to the silence of construction companies which paid bribes. The solution was reasonably obvious from the outset – to beef up police resources in order to gather evidence and secure convictions. It was the kind of illegality a special task force – perhaps backed by powers similar to those used by ICAC, the NSW anti- corruption body – should have dealt with.

Why banking and financial services need investigation

The need for a royal commission into banking and financial services is different. It arises not from a failure to enforce the law or corrupt officials but a reluctance to address important questions about the kind of society we wish to live in. It rests on a concern, based on an abundance of evidence, that these institutions engage in practices which, while not demonstrably illegal, are unfair and dishonest, in ways which cause irreparable harm. They also undermine public confidence in the institutions themselves.

This calls for a comprehensive inquiry so the public can have a better understanding of how these banking and financial services work and who benefits and who loses. We will then be in a position to judge whether laws are needed to bring them into line with ordinary, everyday standards of fairness and honesty.

We had another reminder of why this is needed in a Lateline report for 21st April. The program recounts the story of Michael and Kaye Downer, a retired couple who were pressured by Westpac to borrow far more money than they could afford, and suffered financial disaster when he was retrenched. There was also evidence that bank staff had forged signatures and falsified incomes, no doubt ‘incentivised’ to earn bonus points and salary increases.

Despite compelling evidence of the extent of this abuse of financial power there is a growing sense that the Prime Minister is incapable of taking a leadership role in a debate about the ethical regulation of business and the need to change the culture of the market to avoid going down the American path, which begins with what critics call the ‘revolving door’ and ends with the wholesale capture of regulatory agencies by big business.

Too many lawyers and company directors seem to think legal maxims like caveat emptor are moral principles, which makes no sense when one considers the huge difference in bargaining power and business sophistication which separates Westpac from the Downer family.

No one doubts Turnbull’s ability to win a difficult case for a worthy cause, as he did against the British establishment in the ‘Spy Catcher’ trial – a case the Sydney bar said was unwinnable. But it is a big ask to expect serious structural reform of banking and financial services from someone who has benefitted so much from a career spent with media barons and private banks.

However that may be, and regardless of promises to create a ‘first world, high wage, social welfare economy’, he has from the beginning been captive to conservative party forces. It now seems clear there was never a prospect he would have the numbers to bring in progressive liberals – men and women who believe the party can and should stand for fairness and human dignity as well as ideals of freedom and personal responsibility.

This is, of course, a matter of opinion, but his implausible claim that ASIC can do the job, when there is overwhelming evidence that what is needed is an open public debate about the entrepreneurial freedom to exploit the likes of Michael and Kaye Downer, suggests he may be unwilling, as well as unable, to bring about any major social reform.

Max Atkinson is a former teacher at the University of Tasmania Law School with interests in jurisprudence, political theory and moral philosophy.