A clear narrative is emerging from the Banking Royal Commission that the banking industry's only problem was that its unregulated 'wild west' culture allowed for misbehaviour. No blame should apparently fall on the supposedly poor, under-powered regulator: they valiantly toiled away on behalf of the consumer, but were thwarted at every turn by the government's miserly cuts.
And the consumer was of course thoroughly befuddled by the various options and tricked into signing up for products that they had absolutely no way of knowing were really bad for them.
The problem is almost every bit of that narrative is wrong; and if we misidentify the problem we risk applying the wrong solution.
To be clear, no-one can defend or minimise the misconduct that has been revealed at the Royal Commission. There has been substantive wrong-doing that should not only be condemned in the strongest terms, but also be subject to significant sanctions and the obligation to both compensate wronged customers and deliver a genuine apology.
But we also need to understand that role that governments, regulations and consumer behaviour played in creating the situation that has been laid out in such ghastly detail.
The first misconception is that there is a lack of regulation in the finance and investment industries.
With the possible exception of power generation and medicine, no industry is subject to as much regulation as banking. Those seeking to offer investments to the public have to comply with a raft of obligations, and those seeking to conduct a financial services business must be licenced.
And it is to this licensing regime that scrutiny must be placed, because a government licence functions as a de-facto assurance that the government is doing due diligence on its holder. This is reinforced by statements such as the one then Prime Minister Julia Gillard made in 2011 that our banking regulatory system was "the envy of the world."
Consumers assume, rightly or wrongly, that because the government has approved the holder of the financial services, no further thought is needed. They are 'safe'.
Yet evidence at the Royal Commission suggests ASIC has criminally prosecuted just one license holder in the past 10 years, and launched just six civil actions over the same period. Ten planners had been banned in the past year, but it takes up to two years on average for ASIC to make a decision on a complaint.
This is not effective due diligence. Government regulation has created an expectation in the public that is not being met.
In the absence of a government licensing regime, people would approach financial advice far more warily. And they wouldn't pay as much without seeing results. Ironically, a regulatory regime designed to make it safer, has the exact opposite effect.
Examples of misregulation are endless. For example if government says public bodies and public pension funds can only invest in AA+ rated investments, it not only creates an incentive for those offering investments to get that rating by whatever means, but it also effectively says to those bodies and pension funds that any AA+ rated investment is safe.
The result is government encouraging those managing these investments to substitute the judgement of ratings agencies for their own, and a series of defaults on US sub-prime mortgages becomes a global crisis.
The point is not that misbehaviour by banks (or ratings agencies) is caused by government, it's that government regulation may be ineffective in protecting against this misbehaviour. Sometimes it may make things worse.
Nor is this limited to misconduct. If banks are prevented from enforcing personal guarantees by family members against business loans, they will stop making those loans. This will disproportionately affect those who already have marginal access to capital: young people, women and minorities.
One of the most effective defences against bad advice is actually diligence by customers. This is another area where the narrative around the Royal Commission is unhelpful. As understandable as it may be that consumers trust the advice of licenced financial service providers, it's actually not good enough to blindly follow that advice.
Fraud and deceptive conduct is one thing, but consumers failing to ask even basic questions about bad advice is something else. So too are patronising suggestions that banks should "put their customers' interests first, even when their customers don't realise what those interests really are" as one commentator put it this week. The complete abdication of personal responsibility will almost certainly only make things worse.
In the wake of the scandals of the Royal Commission, it is tempting to put the boot into banks. But it would be a mistake to rush to the conclusion that the answer to bank misconduct is more regulation.
At a minimum, government first needs to think very carefully about what perverse incentives it might create in practice.
Simon Cowan is Research Director at the Centre for Independent Studies.
Sign up for our newsletter to stay up to date.