The banks plans for the Turnbull Government to privatise ASIC has backfired spectacularly, writes Sydney bureau chief and former banker Ross Jones.

Labor's banking Royal Commission is one of the great all time wedgies, a handful of belt and underpants that made the Coalition’s financial genii’s eyes water and snot to form in small beads on their collective upper lips.

Damn!

Coalition plans to melt down ASIC were already well advanced, with "stakeholder consultations" scheduled to get into serious mode in mid-2016. These inputs would have added the finishing touches to the Government’s hoped for laissez faire financial wonderland.

Then, out of nowhere, the wedgie.

Some background …

Back in 2013, the Abbott Government set up the Financial System Inquiry, supposedly a ‘... root and branch examination of Australia’s financial system.'

The report was delivered in November 2014.

But not so fast. Too easy.

By December 2014, another round of consultations was needed, so submissions were called from "stakeholders". This was, apparently, a pretty wide brief because even the Australian Podiatry Council had their two bob’s worth.

The other usual suspects responded – the Australian Bankers’ Association, major accounting firms, the Institute of Company Directors et al – but there is no record of submissions by any of the heavy hitters, the big banks.

Of the 77 submissions received, 15 were deemed "confidential".

Guess who?

Anyway, nearly a year later, in October 2015, presumably after some "high level" discussions and a bit more quiet stakeholder consultation, Treasurer Scott Morrison and his Assistant Treasurer Kelly O'Dwyer released the Government's response to the Inquiry.

The report noted: 'The Government is already conducting a capability review of ASIC.' 

That review found ASIC was mostly concerned with gazing at its own navel: 'The Australian Securities and Investments Commission faces a major shake-up after the Government's capability review found the regulator is too inwardly focused, rather than actively identifying white collar criminals and fraud.'

The report continued: 'We will consider any recommendations the review makes to further enhance the capability of ASIC. We will consider the Inquiry’s recommendations on adopting a three year funding model for ASIC and APRA and the operational flexibility and staffing arrangements of ASIC and the other financial regulators in light of any findings by the capability review. We will also review ASIC’s enforcement regime to ensure it provides a credible deterrent for poor behaviour and breaches of financial services laws. We have also commenced consultation on a model whereby ASIC’s regulatory activities would be funded by industry.'

Fifteen of those consulted chose not to have their views shared around.

The others shared a general warmth to the idea of ASIC being industry funded except for one little thing — how much they or their members might have to cough up in fees.

This is tricky.

Do you set fees based on total assets? Which assets? What is total? And if I am a small building society with a clean loan book and 0.25% losses, should I pay on the same calculation basis as a big bank with a filthy loan book and 1.5 to 2 per cent losses?

If I am a reputable financial advisor, who puts my clients first, should I pay on the same calculation basis as a boiler room of commissioned spivs?

There was one another trifling matter of concern among the respondents — accountability. Or, in financial terms: "How do I know I will get what I pay for?"

Key performance indicators, many noted, needed to be nutted out.

Working these little matters out is going to take time. Without real caution and diplomacy, the whole ASIC privatisation venture is bound to be an abject failure.

Enter the Coalition.

Spooked by the wedgie, they have decided to truncate the process and, rather than make ASIC what it could be with teeth and transparency, they have sold it out.

ASIC is a failure. With a weak leader and timid staff now eternally grateful to the walking cargo cult that is the happy-clapping ScoMo, it's Bankers Aweigh!

Labor’s proposed RC has sent a shiver of fear through the big banks. They were about to pull off their best rort yet — control of ASIC.

Without a RC they will most certainly succeed.

AbysMAL.

Labor’s banking royal commission: One of the all time greatest wedgies