Australia's major banks fear a royal commission will damage their reputation in global markets and hurt customers and investors, Australian Bankers' Association chief Anna Bligh has warned.
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And if the Labor opposition wins the next election – a result on a "knife edge", according to Ms Bligh – then the banks will do everything in their power to fight for a decent hearing and fair terms of reference for the inquiry.
Ms Bligh, in her first address to the National Press Club since taking over as spokeswoman for Australia's banks, said the sector realised it urgently needed to rebuild trust with the community and outline what was being done to improve banks' governance.
She also conceded that banks needed to better explain why their chief executives received huge, multimillion-dollar salaries – backing similar comments from former Liberal treasurer Peter Costello – and promised the Australian Bankers' Association would fight state-based bank-specific taxes being weighed by South Australia and West Australia.
"We have one side of politics [Labor] very committed [to a royal commission], and I don't expect to see any shift in their commitment on this," she said.
"Banks are not resisting a royal commission of inquiry because they are worried about scrutiny. As I outlined, they have faced the scrutiny now of more than 37 reviews, investigations and inquiries. It is not that they have something to hide or that they are fearful of scrutiny.
"What they are deeply concerned about is that, in the absence of any real substance or evidence that would indicate the need for the extraordinary powers of a royal commission, then to rush down that path will seriously damage our reputation in global markets.
"That is not in the interests ... of banks, but it's not in the interests of bank customers and bank investors, and it's something to be very, very careful of."
Ms Bligh said she had ordered two commissions of inquiry while serving as Queensland state premier, and that such inquiries needed to be used very sparingly, as they were "extraordinary powers that go over and above what would be expected by Australian citizens in the criminal justice system".
She outlined three circumstances under which such an inquiry was justified: where the normal criminal justice system of a state had failed, where that system was not designed to cope with systemic abuse, or when a natural or unnatural disaster (such as the Queensland floods or the global financial crisis) had caused significant damage to people.
"I don't see, at this stage, any of those three being satisfied. And neither do the banks," she said.
The Labor opposition has a policy of a royal commission on banking and financial services. Financial Services Council chief executive Sally Loane, who was moderating the question-and-answer session, noted some Labor senators had already said breaking up the big banks should be an outcome.
Earlier, Mr Costello told a summit in Sydney that a royal commission into the major banks was not needed.
"If you wanted to break up the banks, you don't need a royal commission to do that," he said.
"You'd adjust the four pillars policy, or you'd make it easier for new entrants, or you could, if you wanted to, even order divestment. Westpac took over St George, CBA took over BankWest, and if you really wanted to go to extreme lengths [and reverse that], you don't need a royal commission.
"A royal commission is really where you suspect schematic illegality is going on."
