Banking royal commission: Industry braces for possible charges

Former PM Tony Abbott says Australia’s banks do not need excessive regulation as the sector faces for a scathing final report from royal commissioner Kenneth Hayne today.

Individual bankers who have done the wrong thing should be punished but Australia doesn’t need its system “gummed up” with excessive regulation, Tony Abbott is warning ahead of the banking royal commission revealing its recommendations.

The sector is bracing for a scathing final report from royal commissioner Kenneth Hayne QC, which will be released at 4.10pm (AEDT) after the share market has closed today.

Having already condemned the industry’s greed and criticised weak regulators for letting misconduct go unpunished, Mr Hayne will recommend substantial changes across the banking, superannuation and financial services industry.

It is not clear if Mr Hayne will recommend civil or criminal prosecutions over specific misconduct examined during the public hearings, as regulators are already re-examining the cases.

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The federal government took possession of the final report from commissioner Kenneth Hayne on Friday afternoon, with the treasurer, Josh Frydenberg. Picture: Kym Smith

Mr Abbott said the inquiry had exposed horrific conduct by banks and their staff and that should not go unpunished.

But that didn’t mean the whole system was rotten, the former prime minister said.

“In this era when no one ever takes personal responsibility for anything, when something goes wrong we assume it’s a systemic fault as opposed to an individual’s fault,” he told 2GB’s Ray Hadley this morning.

“What I don’t want to do is to see the system gummed up by a whole lot of additional regulation rather than see the people who have actually done the wrong thing being appropriately punished.”

He cautioned against a “royal commission-induced credit squeeze”, echoing calls from Prime Minister Scott Morrison last week, who said bank loans were the lubricant of Australia’s economy.

Former PM Tony Abbott says individuals who have done wrong should be punished, not the whole sector. Picture: John Feder/The Australian

But Consumer Action Law Centre chief Gerard Brody — whose organisation represented many victims — said the public wanted to see “significant consequences” for executives and big banks that broke the law, including criminal charges.

Shadow Financial Services Minister Clare O’Neil said she wanted to see “some accountability” and did not rule out criminal charges.

“When ordinary Australians steal something from a bank they go to jail, but the sense from banking as it has come to pass so far if a bank steals from you they get a bonus at the end of the year and a gold watch when retiring,” Ms O’Neill told ABC TV.

“What we want to see out of this report is some pretty clear accountability mechanisms so that we can look Australians in the face and say, ‘We have got a just society that we live in here and when a bank does wrong to you, you can get proper recourse.”

The report will focus on ensuring money is lent to consumers responsibly, customer remediation, regulation and the remuneration of everyone from senior bank executives to branch staff, brokers and financial advisers.

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It is not clear if Kenneth Hayne will recommend civil or criminal prosecutions. Picture: AAP

Banks have already tightened lending standards in response to the year-long inquiry and earlier regulator measures, but the final report is expected to lead to further restrictions in the availability of credit.

Mr Hayne’s more rigorous interpretation of responsible lending standards will mean banks have to do more to verify customers’ income and their actual living expenses, rather than relying on benchmark expenditure measures.

Mr Hayne has made it clear he wants financial services laws obeyed and enforced by strong regulators, rather than adding a raft of new laws to an already — complex regulatory regime.

Australian Banking Association CEO Anna Bligh said banks have already made a number of changes but there is still much more to do.

“While we don’t know the recommendations in the report, we do know this is an opportunity to reset the industry and to make things better for our customers,” Bligh said.

Meanwhile, the Australian Securities and Investments Commission (ASIC) today ordered Commonwealth Financial Planning Limited (CFPL) to stop accepting new customers and to halt accepting fees from its existing ones.

ASIC said an independent expert hired to investigate the scandal, Ernst & Young, reported back last Thursday that it still had concerns about the bank’s remediation program and compliance systems.

Specifically, Ernst & Young said there remains a “heavy reliance” on manual controls, which “have a higher inherent risk of failure due to human error or being overridden”.

Originally published as Banking royal commission: Industry braces for possible charges