The Hayne royal commission interim report has been released and detailed how the industry fell well below regulatory and community standards.
The interim report covers the policy related issues that emerged from the first four rounds of hearings – consumer lending, financial advice, SME loans and the experiences of regional and remote communities with financial services entities.
Treasurer Josh Frydenberg said the industry was one of the largest in Australia and an industry that impacted all Australians.
“What is clear is that the culture, the conduct and the compliance of the sector is well below the standard the Australian people expect and deserve,” he said.
Mr Frydenberg said the Royal Commission was to report on misconduct and conduct that falls short of community standards and identify causes of that conduct.
“The interim report shines a very bright light on the poor behaviour of our financial sector. Banks and other financial institutions have put profits before people,” he said.
Mr Frydenberg said that greed and monetary benefits had been behind many of the actions of the bank.
“Greed has been the motive as short-term profits have been perused at the expense of basic standards of honesty. The culture and the conduct of the banks were in the words of the commissioner ‘driven by and reflected in their remuneration practices and policies’,” he said.
In the interim report executive summary, Commissioner Ken Hayne said that greed dictated many of actions that were found to fall below legal and community standards.
“The answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty,” said Mr Hayne.
Mr Hayne wrote in the executive summary that even when misconduct was exposed there was rarely any significant punishment by the regulator ASIC.
“The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court. Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct,” Mr Hayne said.
Mr Hayne said that often it appeared that the financial institutions got to dictate the terms of their punishment.
“Too often entities had been treated in ways that would allow them to think that they, not ASIC, not the Parliament, not the courts would decide when and how the law would be obeyed or the consequences of the breach remedied,” Mr Hayne said.
Mr Hayne also posed the question on how to fix the conduct presented by the banks.
“Much more often than not the conduct now condemned was contrary to the law. This does raise the question if new laws are required or if existing laws need to be better enforced. Should the existing law be simplified rather than adding an extra layer of legal complexity to an already complex regulatory regime?” asked Mr Hayne.
ASIC chair James Shipton welcomed the interim report and said that the regulator would carefully consider the reports observations.
“ASIC notes the report’s serious and important observations of ASIC’s role as a regulator,” he said.
ABA's chief executive Anna Bligh said the report marked a day of shame for Australian banks and that there were no excuses.
“Banks accept responsibility for their failures and right now they are working day and night to make things right for their customers,” she said.
The public is invited to respond to Commissioner Hayne’s interim report and the due date for submissions is 26 October 2018.
As of the beginning of the week, the commission had received 9388 submissions with the top three industries in the submissions being the banking industry (62 per cent), superannuation industry (12 per cent) and the financial advice industry (9 per cent).
The final date for members of the public to make online submissions to the commission about past conduct is 5pm today.
After today the commissions is expected to “shift its attention from past experiences to proposals on what should be done in response to the issues raised or conduct uncovered within the banking, superannuation and financial services industry.”
The seventh round of hearings will focus on policy questions from the first six rounds, starting in Sydney on 19 November before moving to Melbourne from 25 November.
The final report from the commission is due 1 February and will include the topics of the fifth, sixth and seventh round of hearings which focus on superannuation, insurance and policy questions arising from the first six rounds respectively.
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]