Kenneth Hayne hands down banking royal commission interim report
COMMISSIONER Kenneth Hayne has not held back in his interim report into the financial services sector, slamming the industry - and the watchdogs who failed to act on their bad behaviour.
Banking
Don't miss out on the headlines from Banking. Followed categories will be added to My News.
A DAMNING interim report from the banking royal commission has highlighted Australia’s financial sector has acted illegally too often and misconduct has gone “effectively unpunished”.
“Banks and other financial institutions have put profits before people,” Treasurer Josh Frydenberg said this afternoon as he publicly released what he dubbed a “frank and scathing” interim report from banking royal commissioner Kenneth Hayne.
Mr Frydenberg said he wasn’t surprised by the report’s findings given the stories that had emerged in the royal commission’s hearings to date.
Australia’s corporate watchdog needed to be stronger in its approach and pursue litigation, impose penalties for wrongdoing rather than negotiated settlements “which have seen the perpetrators of these offences or misconduct get off too lightly”, he said.
HAYNE SAVAGES BANKS IN INTERIM REPORT
In his report today, Commissioner Hayne says greed has been the motive behind banking misconduct and that profits have been the aim “at the expense of basic standards of honesty”.
“How else is charging continuing advice fees to the dead to be explained?” Hayne says.
“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done.
“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.
“Infringement notices imposed penalties that were immaterial for the large banks.”
Hayne does not appear to back new laws in his interim report, questioning what an added layer of legal complexity would gain, but notes the royal commission will look at whether existing laws need to be simplified or administered or enforced differently in the next round of hearings.
Tougher penalties and stronger compliance and enforcement measures will likely be on the cards after the commission’s final report is handed down in February given the Treasurer highlighted that the interim report had found that when misconduct was revealed it either went unpunished or the financial penalties “did not meet the seriousness of what has been done”.
The penalties were also “immaterial to their [the banks’] balance sheets”.
“This interim report is a frank and scathing assessment of the culture, conduct and compliance of our financial system. Australians expect and deserve better,” Mr Frydenberg said.
Asked if ASIC could still be considered the ‘tough cop on the beat’, Mr Frydenberg said: “I think they have shown they need to be tougher.”
He noted that if the watchdog asked for more resources “obviously that will get a favourable hearing from the government”.
“The question that needs to be asked is how did this culture of greed and selling as the dominant focus, how was that allow to permeate the sector to produce adverse outcomes for consumers without being stamped out earlier and without the penalties that exist to be properly enforced,” the treasurer said.
He wouldn’t be drawn on whether criminal charges should be laid against the perpetrators.
WE’LL LEARN THE LESSONS FROM THE REPORT: BLIGH
The peak body representing Australia’s banks this afternoon acknowledged the sector had “failed customers, failed to obey the law and failed to meet community standards”.
Responding quickly to the report, Australian Banking Association chief executive Anna Bligh vowed banks would “learn the lessons” and “repay every penny”.
“Australian banks have a big challenge ahead of them,” Ms Bligh told reporters in Sydney.
“Their job now is to work to do everything possible to find the problems and fix them, to learn the lessons, to repay every penny and, importantly, to work to earn the trust of Australians back again.
“This country needs a banking system that everyone trusts. It’s critical to the economy and it’s critical to the wellbeing and happiness of every Australian.”
She said the report made some “shocking” findings and all of the sector’s failures were “totally unacceptable”.
“Too many customers have been hurt and it has to stop,” she said.
“Having lost the trust of the Australian people, we must now do whatever it takes to earn that trust back.”
Asked whether greed was at the heart of the sector, Ms Bligh said: “I think the commissioner has made some very tough, strong statements about banks today. He certainly hasn’t shied away in acknowledging that the very human factor of greed may well have played a part.” “There are other matters that’s also considered, but there is no place for greed in the Australian banking system.”
EXTENSION REQUEST WOULD BE GRANTED
Earlier Prime Minister Scott Morrison revealed he hadn’t been asked to extend the royal commission past its 12 month reporting deadline.
Only 27 victims have so far had their stories heard out of the 9300 submissions. “Commissioner Hayne has not asked for an extension. If he asked for an extension then he will get one,” Mr Morrison told reporters in Sydney this morning.
“I think that the royal commission has been very vigorous in looking at the details of all of these quite heartbreaking cases for many Australians and being given them the weight that is necessary.”
The prime minister denies the inquiry has been a “once-over quick hit job”.
Labor wants the royal commission extended so thousands more victims can tell their personal stories.
Labor spokeswoman Clare O’Neil says the commission needs time to visit regional areas.
“Six rounds of hearings and more than 9300 submissions have made clear that some financial institutions have fallen far short of treating Australians honestly and fairly,” Mr Frydenberg says.
LABOR: WE’LL IMPLEMENT COMMISSIONER’S FINDINGS
Acting Opposition leader Tanya Plibersek welcomed today’s interim report, saying the two key issues appeared to be the sector was “driven by greed” and that ASIC and APRA had not acted to sufficiently punish misbehaviour.
Labor will examine the report in coming days but Mr Plibersek identified budget and staffing cuts to the regulators as a problem and the “close relationship between the regulators and parts of the industry”.
“Given this damning interim report, we believe that there is a strong case to consider extending the banking royal commission in order to hear from more victims in more places, in more parts of Australia,” she said.
Ms Plibersek announced Labor would launch a task force within Treasury to reform the sector and implement the royal commission’s findings if elected to government.
“The task force, of course, will work closely with victims and their advocates in recognition that the lived experience of the systemic misconduct in the banking sector should inform the response,” she said.
Ms Plibersek slammed the Coalition for fighting “tooth and nail” against establishing a royal commission, noting Prime Minister Scott Morrison, when Treasurer, had dubbed it a “populist whinge”.
The Treasurer said the commissioner and his team had done an outstanding job.
To date, the government has introduced a banking executive accountability regime, increased civil and criminal penalties for financial misconduct, set up a one-stop shop to resolve complaints (the Australian Financial Complaints Authority), appointed a “special prosecutor” and given ASIC $70.1 million for a revamped strategy and enforcement.
Originally published as Kenneth Hayne hands down banking royal commission interim report