Banks Slammed In Scathing Royal Commission Findings
The yearlong investigation into the banks and financial institutions has finally released its scathing findings and a list of 76 ways the sector must change.
The Royal Commission’s Final Report has finally been made public, just after the stock market closed for the day on Monday.
It identifies more than twenty cases of misconduct and rule-breaking and urges the watchdogs ASIC and APRA to take action in court.
The Government has promised to take action on all 76 recommendations in the Royal Commission’s Final Report, including a review in 2022 to ensure changes have been carried out.
By then mortgage brokers will no longer be able to pocket trail commissions from banks, and they will be forced to act in a borrower’s best interests.
There will also be major changes to the way banks deal with farmers, including a national scheme for negotiating debt repayments.
Commissioner Hayne's six commandments:
- The law must be applied and its application enforced;
- industry codes should be approved under statute and breach of key promises made to customers in the codes should be a breach of the statute;
- no financial product should be 'hawked' to retail clients, including superannuation and insurance;
- intermediaries should act only on behalf of, and in the interests of, the party who pays the intermediary;
- exceptions to the ban on conflicted remuneration should be eliminated;
- culture and governance practices (including pay arrangements) must focus on non-financial risk, as well as financial risk.
“The price paid by our community has been immense and goes beyond just the financial," Treasurer Josh Frydenberg said.
“Misconduct must end and the interests of consumers must now come first. From today the sector must change, and change forever.”
The Government will establish a compensation scheme of last resort to ensure that consumers can have their case heard and be confident that where compensation is owed it will be paid.
There were more than 10,000 submissions to the Royal Commission, but less than thirty people wronged by the banks had an opportunity to tell their story in the hearings.
Rien Low was one of the handful of witnesses.
“I feel for the people who haven’t been heard. I hope all those people get a chance," he said.
After his father was killed in a workplace accident, Suncorp came to collect money owed.
“Things just weren’t adding up, then we found out they had inappropriately leant money.”
Mr Low hopes that the lengthy recommendations are made a reality.
“What we are really counting on it the Government to crack down.”
“What’s the point of the Royal Commission if nothing can come out of it.”
Former Queensland Premier and head of the Australian Bankers Association Anna Bligh says the industry is ready “The Royal Commission has shone a real light and exposed some real failures.”
“What this Royal Commission Report represents is an opportunity for banks to reset their relationship with customers and that’s an opportunity they’re determined not to miss.”
“Banks need to get on with the job from today, we have a special task force of every bank represented to get on with the job and make this happen as quickly as possible.”
Canstar’s Chief Financial Commentator Steve Mickenbecker, warned there is pain ahead for shareholders.
“Bank share prices will be affected and banks are a big part of the market.” There is also the risk that it will be harder to get a loan, which will then make for tougher economic times.
“They’ll have to tighten up. I don’t think the system is going to crash but there will be a lot of pain.”
“Investor lending and interest only lending has been tightened up.”
“If the property market does slow significantly, that does hurt the economy.”
“People cut back on spending and the whole economy starts feeling some pain.”
It is a bittersweet day for Jeff Morris, a former Commonwealth Bank employee who led the charge to have a Royal Commission.
“It feels like the end of a very long journey.”
He welcomes much-needed change but feels there are many stories still untold.
“This Royal Commission was called by a Government that didn’t want to have it and they starved it of time and resources.”
Speaking out against misconduct within the Commonwealth Bank has taken a huge personal toll on Mr Morris and his family.
“I just had that conviction, it was a situation I couldn’t walk past.”
He wants to see greater protection for people like him, who speak out publically to expose wrongdoing.
“Whistleblowers are very vulnerable especially when you are taking on such a big corporate.”
The sweeping recommendations for change in the Royal Commission’s final report go some way to restoring the power imbalance between customers and banks.
But first, the recommendations must become a reality, with the Government following through on much-needed changes to the laws.