Scott Morrison and Kelly O’Dwyer must think we’re idiots. 

The government’s line on the royal commission is that it deserves the credit, because Labor argued for a very narrow inquiry while the Liberals wanted a broad one. Apart from being a lie, that also contradicts the government’s argument before the 2016 election — that Labor’s royal commission proposal was so damaging it would harm the Australian financial system, placing the entire economy at risk. The Liberals should at least get their story straight — either Labor’s commission idea was so wide-ranging it could bring Australian capitalism tumbling down, or it was too narrow to get the job done. 

And now O’Dwyer and Morrison are trying to make a virtue of increasing the penalties individuals and corporations face as a result of breaches of corporations law. The government says it intends to increase jail terms for individuals, for some offences to ten years, and increase corporate fines to the largest of $10.5 million, three times the ill-gotten gains or loss adoided, or 10 per cent of annual turnover. But crucially, fines will be capped at $210 million. The Commonwealth Bank made $9.9 billion in profit last financial year. The proposed cap is 2% of that.

This Get Tough act is a day late and a dollar — or more accurately one billion of them — short. In the United States, Wells Fargo is about to be hit with a $1 billion fine for charging unfair fees and forcing consumers to buy insurance they didn’t need. Morrison and O’Dwyer should have adopted the approach recommended last year by the Greens’ Peter Whish-Wilson in a Senate inquiry into penalties for white collar crime, in making fines (calculated as a multiple of the benefit) uncapped. It was the Greens who initially proposed a royal commission, so there’s no shame in the government lifting more of their ideas.

But ASIC needs leaders who are prepared to use the existing powers the regulator has — not the rubbish we’ve been hearing from new chair James Shipton about how it’s up to the banks to clean up their own act. The whole rationale from the government about why a royal commission wasn’t needed in the first place was that ASIC already had royal commission-like powers and could prosecute.

Now it’s saying that it’s ASIC that is guiding the royal commission to all these discoveries of depraved misconduct. Why isn’t ASIC using its existing powers? Why aren’t banking executives getting raided at their offices and homes? Why aren’t financial planners doing the perp walk? It’s good enough for trade union officials and Labor staffers to be raided — why not financial institutions? Michaelia Cash’s office could do the PR for it and make sure the cameras are ready.

ASIC needs an Allan Fels/Graeme Samuel type who isn’t afraid of throwing the book at even the biggest names, regardless of how many enemies in business they acquire along the way. The kind of regulator Australian business has rarely faced, and about whom it screams blue murder when one comes along.

We also need another financial services inquiry. Another inquiry? Yes. There were good aspects to David Murray’s financial services inquiry in 2014 — in some areas it was better than anyone could have expected. But Murray was blind to the problem of vertical integration of financial planning, wealth management and banking. Murray thought there simply wasn’t a problem if appropriate regulation was in place, and the issue barely even appeared in his final report.

Murray’s lack of interest was understandable — it was he who began the big bank pursuit of vertical integration when he was Commonwealth CEO, with its acquisition of funds manager and insurer Colonial in 2000. In a statement of how times have changed far more eloquent than any apology or hesitant royal commission testimony, Commonwealth is now looking to offload Colonial via a float.

Defenders say the vertical integration problem is going away as all the major banks except Westpac abandon their wealth management and/or insurance arms. That still leaves the problem of whether competition regulation in the banking sector — both across the industry and up and down product chains — is appropriate. The Productivity Commission, for example, believes the current four pillars system, which protects the major banks from takeover or merger, has outlived its usefulness and we have reduced competition in the sector by regulating too much for structural soundness.

Arguably, the focus on having an “unquestionably strong” banking system (Murray’s phrase) has also come at the expense of consumer welfare. The question of competition regulation in banking should be the subject of an independent inquiry — preferably one not run by a former bank CEO.