The government of Australia has announced plans to set up a Royal Commission to examine the conduct of the financial services firms in the country.

The commission will enquire about issues such as the extent and effect of misconduct by a financial services entity, and examine how well equipped regulators are to detect and address misconduct. It has to submit its final report within a year.

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Banks, insurers, financial services providers and superannuation funds (not including self-managed superannuation funds) will fall under the remit of this commission.

However, the commission will abstain from inquiring into financial stability or resilience of banks.

“Ongoing speculation and fear-mongering about a banking inquiry or Royal Commission is disruptive and risks undermining the reputation of Australia’s world-class financial system. The Government has decided to establish this Royal Commission to further ensure our financial system is working efficiently and effectively. Instead of the inquisition into capitalism that some have called for, the Royal Commission will take a conventional, focussed approach,” the government said in a statement.

The announcement regarding the commission comes after the chairmen and CEOs of the country’s big four banks, namely ANZ, NAB, Westpac, and Commonwealth Bank called for an inquiry.

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In their letter, the banks said: “Our banks have consistently argued the view that further inquiries into the sector, including a Royal Commission, are unwarranted. They are costly and unnecessary distractions at a time when the finance sector faces significant challenges and disruption from technology and growing global macroeconomic uncertainty. However, it is now in the national interest for the political uncertainty to end.”