Our "Big Four" bank chief executives might be some of the best paid corporate executives in the country, but they've been earning some of that money this week as they front the banking inquiry by the House of Representatives economic committee.
There's no shortage of ammunition to be fired at them. From allegations of poor financial advice, to their role in corporate collapses and even allegations of rate-rigging, the Big Four are copping it from all angles – and, frankly, some of the mud should stick.
Of course, this is the federal government's preferred alternative to the mooted banking royal commission being pushed by the Labor opposition and some of the minor parties, including the Greens, who have been running hard on the topic.
Both the bankers, and the government, it seems, are prepared to cop a bit of stick at the inquiry, but then hopefully put the issues to bed, relying on the current regulations to address any issues that are forthcoming. And, it's fair to say, most of those issues are nothing new, but rather a public exploration (and dressing down) of past failures.
The question, of course, is whether the inquiry is enough to sate the appetites of those who are hoping for greater accountability, or whether there is enough public – and political – momentum to make a royal commission inevitable.
The lack – thus far, at least – of a new or particularly damaging smoking gun means that a royal commission remains unlikely, with the bank bosses appearing appropriately contrite, and all promising to improve.
But should there be a royal commission, and what does it mean for shareholders?
There are as many views as there are pundits, when it comes to the need for a more formal inquiry. If we exclude – and we should – vested interests and lobbyists, those against a royal commission cite the already sufficient regulations covering financial services, pointing out that such an inquiry would be little more than a glorified and expensive witch-hunt.
Those calling for more action would suggest – with some real basis – that whatever regulations we have are either insufficient, or insufficiently policed, to properly look after the interests of those the banks are accused of having wronged.
Of course, just highlighting any wrongdoing is only part of the battle – unless such outcomes were coupled with an improvement in regulation and/or enforcement, it would indeed do little by itself to improve future outcomes. The proponents would suggest that a royal commissioner could make such recommendations, of course, and that a government would be silly not to implement them.
So how should bank shareholders be feeling? There's a wide range of possible outcomes, but a much, much narrower range of likely ones. The banks are already taking actions to help make up for past shortcomings (and, if you were cynical, to help combat suggestions that a royal commission is necessary), which may well convince the government that enough is being done and no additional changes are needed. And without the political will on the government benches, there's a good chance that's as far as things go. Shareholders can breathe easily.
And frankly, even if there were to be more significant regulatory change, say to financial planning and insurance practices – and I think there should be – it would be very unlikely to be material to bank earnings.
Foolish takeaway
You're almost certainly also – directly or indirectly through superannuation – a bank shareholder, and vice versa. And it's in all of our interests that we have a profitable, functioning banking sector that also acts ethically and without conflicts of interest. We're not there yet, but shareholders shouldn't fear the outcomes of this inquiry.
![NAB chief executive Andrew Thorburn at the parliamentary bank inquiry last week.](/web/20161007153828im_/http://www.smh.com.au/content/dam/images/g/r/w/5/v/1/image.related.articleLeadwide.620x349.grwbab.png/1475826574633.jpg)
New report: Forget BHP and Woolworths. These three "new breed" top blue chips for 2016 pay fully franked dividends and offer the real prospect of significant capital appreciation. Click here to learn more.
Scott Phillips is the Motley Fool's director of research. You can follow Scott on Twitter @TMFScottP. The Motley Fool's purpose is to educate, amuse and enrich investors.