News that the Turnbull government today announced a new $127.2 million reform package to fund the corporate regulator the Australian Securities and Investments Commission (ASIC) will come as little surprise given the public pressure for greater regulation of the banks.

Banks like Commonwealth Bank of Australia (ASX: CBA) will likely be over the moon to reportedly pick up the majority of the cost of the additional funding if it helps deliver an election victory to the Turnbull government in the forthcoming federal election.

In fact Westpac Banking Corp (ASX: WBC) has already come out in favour of the political reforms that will cost the big 4 banks virtually nothing compared to their combined profits of more than $30,000 million in the last financial year.

Other major regulators like the Financial Conduct Authority in the United Kingdom are already entirely funded by the firms they regulate, although this model can create a perceived conflict of industry compared to a publicly funded model.

Overall though the timing of this move looks more political than anything as the banks will be more than happy to support the Turnbull government in its attempts to look serious on regulation just prior to an election some think may be influenced by the issue of bank regulation.

There can be little doubt the banks will be quietly rooting for a Turnbull win given his background as a former head of Goldman Sachs Australia and wild enthusiasm for new financial technologies that could help the banks save huge amounts of money.

The real regulatory threat for the banks doesn’t come from ASIC, but APRA, the prudential regulator that’s forcing the banks to carry higher capital and in so doing reducing their return on equity and profitability.

That’s why bank shares have plummeted over the past year and could have further to fall….

Investors then are best off watching the banks from the sidelines for now, especially when there are other big dividend payers with altogether brighter earnings growth outlook….

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.