In a statement released just hours after the government's announcement, the Australian Banking Association (ABA) said banks "welcomed" and would "fully co-operate" with a royal commission.
"Australia has a strong and stable banking system that is critically important to the national economy," the statement said.
"Our banks do not fear scrutiny or accountability.
"They have actively participated in 51 substantial inquiries, reviews and investigations since the GFC and are ready to contribute to this commission."
Although banks felt a "lengthy, $75 million" inquiry into the sector was unwarranted and failed to recognise that the sector was undergoing major reform, the political turmoil and uncertainty affecting the industry is an unacceptable risk to the system's stability, the statement said.
"Australia’s banking and financial system is too important to leave in the hands of minor parties and fringe elements in the Parliament.
"The possibility that terms of reference on something this important could be the subject of political horse trading should worry every Australian."
The letter penned by top executives of the major banks calling for the inquiry was an act in the “national interest” in order to minimise further risk to the banking sector.
“Bipartisan agreement on a properly constituted inquiry, free from political interference, is the best way forward if we are to avoid further damage or harm to Australia’s financial services sector,” ABA's statement said.
Financial Services Council (FSC) chief executive Sally Loane also backed the royal commission, stating that it “should end the politicisation of financial services” and presented “opportunity to establish a positive agenda for the future”.
“The FSC notes the draft terms of reference have made it clear that the royal commission is not required to go over the same ground as existing inquiries,” Ms Loane said.
“We urge the Parliament to remain focused and not let the royal commission stand in the way of passing important reforms which will have demonstrable pro-consumer outcomes.”
However, other industry bodies had cooler responses to the announcement, with Finance Sector Union national secretary Julia Angrisano expressing “serious reservations” that the government had backflipped on its decision to establish a royal commission.
“For many months now, this government has been saying there is no need for a royal commission,” Ms Angrisano said in a statement.
“Doggedly, they have stuck to this line for many months, yet today, after receiving a green light from the banks, the PM has announced a royal commission.
“Who is pulling the strings here?”
She also questioned whether the government had already spoken to the banks about its terms of reference.
“Who is running Australia? The banks or Prime Minister Turnbull?” Ms Angrisano said.
“Having folded on the royal commission after receiving a letter from the banks, Mr Turnbull must now give Australians a guarantee that the banks will have zero involvement in drafting terms of reference,” Ms Angrisano said.
A spokesperson for the Association of Superannuation Funds of Australia said it was “disappointed” that the government had decided to include superannuation in the royal commission’s remit.
“Research released by ASFA this week shows super is working exceptionally well, with retirees having higher incomes and a smaller proportion of those aged more than 65 being on the age pension,” the spokesperson said.
“A plethora of never ending inquiries, reviews and regulation is at odds with maintaining a system that is serving Australians tremendously well.”
