Banking Royal Commission findings: What you need to know

After hearing the appalling behaviour within the financial services sector, the Royal Commission findings have finally been revealed. Here’s what you should know.

The customer can no longer come second to profit — this is the theme guiding Commissioner Kenneth Hayne’s landmark report into misconduct in banking, superannuation and other financial services.

Below are his key recommendations and findings.

Treasurer Josh Frydenberg said the Government will back nearly all the ideas put forward by Commissioner Hayne. Unless specified, the recommendations in this list do have its thumbs up. The Opposition, which pushed hard for the inquiry in the first place, is backing all recommendations.

This is the report broken down into different sections.

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Commissioner Kenneth Hayne has made multiple recommendations. Picture: David Geraghty / The Australian

Banking

* In arguably the biggest shift, Mr Hayne said the home-loan borrower should pay the mortgage broker for finding a loan. At the moment the lender pays the broker via commissions. The Government isn’t endorsing this switch in its entirety, but Labor likely will. Commissioner Hayne said the first step would be to get rid of trail commissions over two or three years, which the Government does support.

* Mortgage brokers must be made to act in the best interests of the borrower.

* Car dealers offering finance should be covered by consumer credit protections.

* Banks must do a better job of providing access to services for people in remote areas and those who struggle with English.

* Ban dishonour fees on basic accounts.

* During a drought or other natural disaster, default interest is not to be charged on loans secured by farm land.

* Banks need to ensure distressed agricultural loans are managed by experienced agricultural bankers, with “enforcement” to be treated as the worst outcome

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Financial advice

* Each year provide in writing the services to be received and total fees to be charged.

* Any ongoing conflicted remuneration — pay which influences advice — currently permitted should be axed as soon as possible. The government supports this.

* Consider reducing the cap on life insurance commissions, with the goal of “ultimately” getting to zero.

* Look at having a blanket ban on conflicted remuneration for general insurance and consumer credit insurance products.

* When a business offering financial planning is confident an adviser has engaged in misconduct, clients should be told and compensated promptly.

* Set up a new disciplinary system for financial advisers.

Superannuation

* Change the “machinery” of the superannuation industry so people only have one default account.

* Ban advice fees on MySuper accounts.

* The unsolicited sale — “hawking” — of superannuation should be stopped.

Treasurer Josh Frydenberg has tabled the report. Picture: AAP

Regulation

* The recently established Banking Executive Accountability Regime (BEAR), which is a system of checks and penalties for lenders’ leaders, should be extended to big super funds.

Insurance

* Hawking of insurance should be banned.

* Funeral insurance should be subject to consumer protection laws.

* Cap the commission car dealers can earn on add-on insurances.

* Claims handling should be considered a financial service under the law, which means it would need to be provided “efficiently, honestly and fairly”. In giving this the tick, Mr Frydenberg said “inappropriate claims handling practices can cause significant consumer detriment”.

* The BEAR should also cover insurers.

Pay

* The regulator of banks and insurers, APRA, should not only watch for financial risk but also misconduct and compliance risks.

* Those regulated by APRA must build pay systems that “encourage sound management of non-financial risks … and reduced the risk of misconduct”.

* Force APRA-regulated companies to make rules that allow for claw back of pay in “appropriate circumstances”.

* APRA should focus on building cultures “that will mitigate the risk of misconduct”.

* Frontline staff should be paid not only for what they do but “how” they do it.

The findings will affect every Australian in some way. Picture: Thinkstock

Regulators

* Retain APRA and the corporate regulator, ASIC, but there needs to be a new authority — independent of government — to oversee the “twin peaks”.

* ASIC’s starting point on enforcement should be “whether a court should determine the consequences” rather than infringement notices, especially if the alleged bad behaviour was by a large company.

* By law, APRA and ASIC should do more to co-operate and share information.

External dispute resolution

* Set up a compensation scheme of last resort.

Law breaches

* Widespread breaches referred to regulators, which could lead to civil and criminal charges.

* CBA may have broke the law in the way it gave advice on its Essential Super product.

* CBA’s CFSIL unit may have committed breaches by being slow to move people to MySuper accounts. NAB, and one of its superannuation licensees NULIS, have been referred to the regulator for a possible similar breach. Ditto Suncorp.

* OnePath, Oasis and IOOF Investment Management Limited (IIML) have been referred to APRA over accusations of fees for no service.

* AMP may have breached superannuation laws through “manifest” passivity.

* IIML “may not have given priority to members’ best interests” .

* Super trustee Suncorp Portfolio Services and Suncorp Life may have broken super laws by failing to act with due care, skill and diligence.

* Website misrepresentations acknowledged by Allianz have been referred to ASIC while the “inadequacy of its compliance systems” have been referred to APRA.

* TAL Life is accused of acting inappropriately through “bullying”, “surveillance” and the “misuse of the daily activity diary”, Commissioner Hayne said.

* Youi has been referred to ASIC for allegedly not acting in good faith over claims following natural catastrophes.

For the full report go to the Royal Banking Commission website.