Banking royal commission: Kenneth Hayne delivers full findings
A dramatic overhaul of the nation’s financial services industry in the wake of the banking royal commission is set to deliver Australians fairer and simpler products that will leave them better off. These are the most significant recommendations made by commissioner Kenneth Hayne.
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A dramatic overhaul of the nation’s financial services industry is set to deliver customers fairer and simpler products that will leave them better off.
Kenneth Hayne’s Royal Commission final report, delivered in three detailed volumes this afternoon, contains what could be a potentially fatal blow for the mortgage broking industry.
The banking, financial advice, superannuation and insurance sectors didn’t go unscathed either, as Mr Hayne handed down a series of recommendations to get them to lift their game and leave customers better, not worse off.
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The most significant of 76 recommendations to follow seven rounds of public hearings over 68 days, the appearance of more than 130 witnesses and review of over 10,000 public submissions, are:
• A home-loan borrower, not the lender, is to pay the broker a fee for acting in connection with home lending. The government has not committed to acting on this in full, but Labor likely will;
• Financial advice fee arrangements must be renewed annually by the client after being provided, in writing, with the precise services being received and the total cost;
• Changes to ensure a person has only one default superannuation account. This account is where an employer must pay the employee’s super contributions unless told otherwise;
• A new authority independent of the Government to oversee the prudential regulator, the Australian Prudential and Regulation Authority and the corporate cop, the Australian Securities and Investments Commission;
• A ban on “hawking” — the unsolicited offer or sale of superannuation should be prohibited for both insurance products and super products; and,
• The referral to regulators of AMP, the Commonwealth Bank, National Australia Bank, and others. This could lead to criminal or civil charges.
FRYDENBERG GRILLED BY SALES
Treasurer Josh Frydenberg has come under pressure in an interview with Leigh Sales, who asked why the public should trust the Government to clean up the banks when they “had to be dragged” to the royal commission.
In an interview on ABC 730, Sales told him: “You said you’ll act on everything in this report. Given that’s 76 things that need fixing, was the Coalition wrong to strenuously oppose a royal commission into the banks for as long as it did?”
Mr Frydenberg replied, saying: “Look, we can debate for hours, Leigh, what Labor failed to do when they were in office.”
.@leighsales: Was the coalition wrong to strenuously oppose the #bankingrc for as long as it did?@JoshFrydenberg: Oh we can debate for hours what Labor failed to do-@leighsales: -No, I’m asking about you. @JoshFrydenberg: I’m looking to the future. #auspol #abc730 pic.twitter.com/v73q8Ur9O6
— abc730 (@abc730) February 4, 2019
She then told him: “I’m asking about you. You were in office I’m asking about you.”
Mr Frydenberg then replied, saying: “When we first came into office we initiated David Murray’s financial systems inquiry, a very significant inquiry that looked at the financial system and the recommendations of which we’ve been implementing since.
“We’ve adopted a number of important reforms that have been endorsed, not just by Commissioner Hayne today, but by previous reports including by the Productivity Commission into superannuation.”
Sales then asked him “why should the public trust this Coalition Government to clean up the banks when you had to be dragged to that inquiry in the first place?”
He said: “Well, we did call the royal commission and today we’ve responded to it.”
She didn’t let up, saying: “You did have to be dragged to it.”
He fought back, saying: “And today we have said we’re taking action on all 76 recommendations. These are recommendations that will have far-reaching consequences across the financial system, including putting in place the banking executive accountability regime, not just within banks which we initiated, but with an insurance and superannuation companies, ensuring trustees of superannuation funds actually face penalties for breaching of their duties.
“Putting in place a new disciplinary body that deals with financial advisors. There’s a whole series of recommendations that Commissioner Hayne has handed down which we have adopted today.”
COMMUNITY’S TRUST MUST BE RESTORED: TREASURER
Treasurer Josh Frydenberg, in outlining the commissioner’s findings, earlier said: “The price paid by the community is immense.
“This is why the community’s trust in our financial institutions has been lost and this is why it must be restored.
“My message to the financial sector today is this misconduct must end. And you must put the interest of consumers first.”
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Mr Frydenberg said the royal commission was a “scathing assessment of conduct driven by greed and behaviour that was in breach of existing law and fell well below community expectations”.
Mr Frydenberg said the government would take action on all 76 recommendations of the report.
He also the government was confident the two key regulators — ASIC and APRA — would be better able to hold “those who abuse our trust” to account, through new laws and better resources.
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Shadow treasurer Chris Bowen said Labor would support all 76 recommendations in principle, in what he called a “sobering report”.
“Banks and financial institutions should work on an ethical basis ... they should be above all, ethical,” Mr Bowen said.
He warned the government against weakening its response to the report, and said Labor was ready to change the laws immediately where recommendations had bipartisan support.
“The Liberals have shown they cannot be trusted to clean up the banks,” Opposition Leader Bill Shorten said in a statement.
Former prime minister Tony 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, he added.
Influential Senate crossbenchers Pauline Hanson and Derryn Hinch said criminal charges should be laid against those found to have done the wrong thing.
“Somebody has to face criminal charges here because some of the actions were absolutely unconscionable,” Senator Hinch said.
WATCHDOG TO OVERSEE REGULATORS
ASIC and APRA themselves will be overseen by an independent watchdog to ensure they are doing their job and both will be subject to regular reviews.
As well, an extra $170 million will be provided to the two bodies, as well as the commonwealth prosecutor’s office and Federal Court, to bolster their work. ASIC is set to become the main conduct regulator over the superannuation industry, with access to civil penalties for breaches of the law by superannuation trustees and directors.
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As well, the Federal Court’s jurisdiction will be expanded to cover corporate criminal misconduct to speed up the consideration of cases brought by regulators.
Two financial giants face possible criminal charges with executives even facing jail time, the commission findings also reveal.
The commission report reveals Mr Hayne proposes possible criminal charges be referred to the corporate cop, but the names of institutions have not been revealed as investigations continue.
It is in relation to the $850 million fee-for-no-service scandal that has swept up major institutions including AMP, ANZ, the Commonwealth Bank and Westpac.
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Under the scandal, banks and wealth managers were found to be charging fees on people they gave no service to.
In some cases with the CBA, NAB and AMP, fees were charged to dead people.
Mr Hayne in his report reveals the corporate cop was already considering charging another entity over fee-for-no service breaches.
Mr Hayne says the time has come to address financial misconduct and prevent its recurrence, proposing a raft of measures designed to better protect consumers.
Mr Hayne made 24 referrals, including all the major banks except for Westpac, to the Australian Securities and Investments Commission and Australian Prudential Regulation Authority for further investigation.
His final report included scathing criticisms of industry players.
While some have tried to blame misconduct on a few bad apples, Mr Hayne’s final report makes it clear that the buck stops with the banks and other financial services companies, their boards and senior executives.
“There can be no doubt that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and those who managed and controlled those entities: their boards and senior management.”
Mr Hayne was scathing of some bank bosses, particularly the NAB, for being unwilling to accept responsibility.
“It seemed to me that there remain elements of unwillingness to recognise, and to accept responsibility for, poor conduct of the kinds examined in this inquiry,” he said.
Mr Hayne said he was not confident NAB had learned the lessons from the past as he criticised its CEO Andrew Thorburn and chair Dr Ken Henry, a former Treasury secretary.
He said Mr Thorburn treated the charging of fees for no service as nothing more than carelessness combined with system deficiencies.
“The amounts of money that just ‘fell into the pocket’ of so many large and sophisticated financial entities, the number of times it happened, and the many years over which it happened, show that it cannot be swept aside as no more than bumbling incompetence or the product of poor computer systems,” Mr Hayne said.
To read the full financial services royal commission report click here.
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FOR FURTHER COVERAGE, SEE LINKS ABOVE
Originally published as Banking royal commission: Kenneth Hayne delivers full findings
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