Banking Royal Commission: Everything you need to know
National Australia Bank and its two top bosses were singled out for searing criticism by Royal Commissioner Kenneth Hayne, who said he was not convinced the bank would take responsibility for doing the right thing. HERE’S EVERYTHING YOU NEED TO KNOW
NSW
Don't miss out on the headlines from NSW. Followed categories will be added to My News.
- Banking Royal Commission: Whistleblower’s career destroyed
- Banking report shows it was more than ‘bad apples’
Australia’s leading bankers could face jail terms and millions of dollars in fines for systematically ripping off customers, with a scathing assessment of their bad behaviour detailed by Royal Commissioner Kenneth Hayne in a three-volume report handed down yesterday.
Mr Hayne uncovered years of systemic abuse of everyday customers by finance institutions which will lead to a once- in-a-generation overhaul of the industry. Sweeping changes to home loans, insurance, financial advice and superannuation will seek to tip the ledger back in favour of the customer after the report found decades of despicable behaviour from financial institutions which fleeced Australians of hundreds of millions of dollars.
Commissioner Kenneth Hayne has ordered that greedy finance titans no longer be able to profit by charging fees for no service and seeks to bring an end to opportunistic hawking of insurance and superannuation as well as a severing of the cosy relationship between banks and mortgage brokers.
DAMNING: Banking Royal Commission 5-minute guide
SCOTT PAPE: Barefoot Investor explains banking report
OPINION: Australia’s banks need to do better
COURTS: 10 new judges to handle banking criminal cases
He has also demanded fat cat banker salaries no longer be linked to shareholder returns, warning that much of the misconduct and bad behaviour revealed in the Royal Commission had been “driven by the pursuit of profit”.
And in a brutal broadside to the regulators who have failed the industry, Mr Hayne has called for another oversight body to police the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.
FUMING: Mortgage brokers livid at Royal Commission
PROPERTY: What banking report means for home buyers
DODGY: Controversial financial planner fees wiped
The government has pledged to take action on all 76 of Mr Haynes’ recommendations, but equivocated on a call for mortgage brokers to charge borrowers instead of lenders for fees.
Labor has indicated it will adopt all recommendations if it wins government.
The three volume missive from Mr Hayne follows harrowing testimony heard by the Royal Commission, including despicable behaviour including selling insurance to a young man with Down syndrome and charging dead people bank fees.
“From today, the banking sector must change and change forever,” Treasurer Josh Frydenberg said, declaring that businesses and lives had been “broken” by misconduct in the sector.
Mr Hayne has instructed the regulators to investigate more than 20 cases of misconduct and even urged the Australian Securities and Investments Commission to pursue criminal action.
This could lead to individuals facing jail terms and fines of almost $1 million and corporate bodies up to $10 million.
He saved perhaps his most stinging broadside for NAB and its bosses, declaring he fears there is a “wide gap between the public face NAB seeks to show and what it does in practice”.
In a stunning attack, he named NAB CEO Andrew Thorburn and chairman Ken Henry — the architect of Labor’s tax review — and specifically said he is not confident they had “learned lessons”.
RELATED COMMENT
PETER KURTI: Banking report shows it was more than ‘bad apples’
DAVID KOCH: Dodgy financial advisers betrayed us all
BAREFOOT INVESTOR: Greed isn’t going away
He said NAB stood apart from the other big banks when it came to accepting their wrongdoing.
Between them, AMP, ANZ, NAB, CBA and Westpac will pay customers compensation totalling $850 million for taking money as payment for services that were never provided.
Mr Hayne said the conduct by banks in taking money for nothing from customers was “so widespread that seeing it as no more than careless must be challenged”. The commission held seven rounds of public hearings over 68 days which heard from more than 100 witnesses and accepted over 10,000 public submissions.
The breadth of changes sweeps across the mortgage broker, insurance, superannuation and financial advice industries and aims to stem the rivers of gold flowing to financial operators for selling products people don’t need.
It also singles out farmers and people with poor language skills for better treatment.
Despite not committing in full to the demand that mortgage brokers charge borrowers fees, Treasurer Frydenberg pledged the government would “go further” than the overall recommendations.
This includes establishing a compensation scheme of last resort and expanding the Australian Financial Complaints Authority to it can award claims going back a decade.
The jurisdiction of the Federal Court to cover corporate criminal misconduct will be expanded to expedite cases and the Australian Prudential Regulatory Authority will face a capability review by Graeme Samuel AC.
Specifically targeting remuneration in the industry, Mr Hayne said salaries designed so executives were rewarded with major bonuses had been dangerous.
“Those remuneration arrangements increase the likelihood that the entity will engage in misconduct, or conduct that falls below what the community expects,” Mr Hayne said.
In addition to the fee for no service scandal the Commissioner found a litany of failures, legal breaches and dishonest conduct including inflated superannuation fees and insurers failing to help customers in natural disasters.
Of the cases Mr Hayne has asked the regulators to investigate, Commonwealth Bank will come under the most scrutiny with at least five referrals.
NAB, Suncorp, ANZ, AMP, IOOF, Allianz, TAL and Youi were all referred to regulators for further investigation.
Opposition Leader Bill Shorten said in a statement the findings were a “dark day for Australian banking” and an indictment on the industry’s greed. In the past, he criticised Scott Morrison for voting against the commission when he was Treasurer.
In 2016, Mr Shorten said: “Scott Morrison voted against the Banking Royal Commission 26 times.”
That year, Mr Morrison branded Labor’s push for a commission as a “populist whinge”.
To read the full financial services royal commission report click here.
Pair nabbed for not caring
Edward Boyd
National Australia Bank and its two top bosses were singled out for searing criticism by Royal Commissioner Kenneth Hayne, who said he was not convinced the bank would take responsibility for doing the right thing.
Mr Hayne’s final report said NAB stood out among the big four banks in his inquiry into misbehaviour in the banking sector, and was particularly critical of chief executive Andrew Thorburn and chairman Ken Henry.
“Having heard from both the CEO Mr Thorburn, and the chair Dr Henry, I am not as confident as I would wish to be that the lessons of the past have been learned,” he wrote.
“I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly.”
When he gave testimony last November, Dr Henry — a former Treasury Secretary who led a review into Australia’s entire tax system in 2010 — came under fire for long answers that seemed more like lecturing than responding to questions about scandals at his bank.
“I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues,” Mr Hayne wrote.
“I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS on this account is likely to be more than $100 million. Overall, my fear — that there may be a wide gap between the public face NAB seeks to show and what it does in practice — remains.”
The report puts further pressure on Dr Henry and Mr Thorburn, who is paid a $4.3 million salary, to consider their jobs at NAB.
Ex-Premier Mike Baird is NAB’s chief customer officer and a logical choice to replace Mr Thorburn. Adding to the pressure, Mr Thorburn’s ex chief of staff was sacked after being linked to a bribery investigation. NAB said it would review the report before giving “updates as appropriate.”
Massive changes to financial products
Anthony Galloway
Cold calling customers to hawk insurance and superannuation products will be banned in a drastic crackdown on the industry.
Royal Commissioner Kenneth Hayne has taken particular aim at dodgy insurance products in handing down a range of recommendations to curb the industry’s “sales-driven” culture.
The government has backed the changes, with Treasurer Josh Frydenberg saying companies needed to stop forcing “worthless insurance policies” on to customers. Under the reforms, insurance companies will be banned from refusing to pay just because a customer failed to disclose everything to them when they bought a policy.
Customers will no longer have a strict “duty of disclosure”, and will now only have to take “reasonable care” not to make a mistake when signing up. The measure is aimed at stopping insurance companies from refusing a pay out because of an customer’s honest mistake in forgetting to declare something.
This will place the burden on an insurer to elicit the information that it needs to assess whether it will insure them and at what price.
The life insurance industry’s overhaul comes after the Royal Commission singled it out for a continuing culture of putting profits over people.
Insurers will only be able to get out of a life insurance contract if they can show that they would have never entered into it in the first place.
Mr Hayne has also called on ASIC to lower commissions for selling life insurance products, with the aim of completely eliminating them.
The ban on hawking superannuation and insurance policies comes after the Royal Commission heard evidence of vulnerable consumers being sold insurance products through unsolicited phone calls where “pressure selling” tactics were used. This resulted in customers buying products they did not want or need.
In one case a 26-year-old man with Down syndrome was badgered to buy a $100,000 life insurance policy he didn’t want. Most of the hawking cases related to phone calls.
The government has agreed to ban hawking for both insurance and super products.
Commissioner Hayne lashed financial advisers for a “sales-driven, commission-based culture” in which “comprehensive advice was not commonly sought or given”.
Icon now a symbol of broken dreams
It was the building often depicted on the Commonwealth Bank money boxes it has handed out to children since 1922 but today the State Savings Bank Building represents stories of financial ruin, greed and eroded trust.
It has stood as one of the most distinguished buildings in Sydney for more than a century but without trust the Commonwealth Bank which still occupies part of the building — also known as the former Commonwealth Bank Building — risks falling apart.
The heritage listed site was bought by Macquarie Group in 2012 and after refurbishments now serves as their global headquarters at 50 Martin Place.
As the Hayne Commission handed down its final recommendations yesterday victims continued to speak of their own stories of financial ruin driven by greed and the pursuit of profits by the major banks.
In his remarks, Kenneth Hayne said “most” of the bank executives had professed to having learned from the evidence heard in the inquiry.
If the financial sector does not reform then the building that has stood as a symbol of integrity for a century will symbolically crumble and with it will go all the cachet of those old money boxes — rectangular and roughly the dimensions of the bank building and printed with the building’s exterior.
The CBA is due to report its first-half earnings on Tuesday.
CEO Matt Comyn will no doubt be asked about the Commonwealth Bank’s failure to comply with ASIC’s enforceable undertaking, particularly as the royal commission fallout takes hold.
Lucky few get their cash back
Annabelle Hennessey
Merv and Robyn Blanch had been CBA customers for 65 years when they lost about $170,000 after receiving dodgy advice from financial planner Don Nguyen.
The couple, who live in Sydney’s lower north shore, were self-funded retirees when they invested $260,000 in an allocated pension with the Commonwealth Financial Planning division. By March 2009 they were left with just $92,000.
Mr Nguyen was banned by ASIC for seven years after it was alleged he had forged client signatures, created unauthorised investment accounts and overcharged on fees.
Mr and Mrs Blanch went public with their story in 2014, when they called for a royal commission into the banking system.
They have since received compensation from CBA and consider themselves among “the lucky ones”.
“We’re pleased the Commission has taken place, not just for ourselves but for the people who haven’t been able to get their savings back.
“We hope that other people do benefit.”
ANZ chief Shayne Elliott’s stunt
Jack Houghton
AS victims of banking greed waited to see the report into financial misconduct the head of one of Australia’s biggest banks was a long way from dealing with his issues.
Instead, ANZ chief executive Shayne Elliott slapped on a goofy red hat and a bum-bag before taking to Melbourne streets to hawk copies of The Big Issue. Mr Elliott, who enjoys a $5.25 million salary, was taking part in a publicity stunt to highlight the magazine, which is sold by the homeless on city streets to raise funds for their daily needs.
Meanwhile, Mr Elliott’s bank has been referred to the Australian Prudential Regulatory Authority in relation to the conduct of ANZ-owned super funds.
However, Mr Elliott refused to comment on the findings of the report when approached by journalists as he did his magazine rounds yesterday. It was a productive little shift however, as he managed to sell 60 copies of the magazine and help raise awareness for the homeless. NAB Acting CEO Gary Lennon will also take part in The Big Issue promotion next Monday.
Helping hand for NSW farmers
Sheradyn Holderhead
Drought stricken farmers can expect banks to lend them a hand during tough times under changes to loan arrangements recommended by the Royal Commission.
The government has agreed to establish a national loan mediation scheme to help lenders and borrowers to agree on practical measures when addressing financial difficulties.
Royal Commissioner Kenneth Hayne also wants banks to stop charging farmers the higher default interest rate when they are struggling to make repayments while a drought or other natural disaster was declared.
Mr Hayne said a “neutral and independent mediator” could assist farmer and lender to reach an agreement on current and future repayments.
“Farm debt mediation has too often been treated as a step that is taken only because the lender considers enforcement very probable, even inevitable,” he said.
Mr Hayne said while he had no objections to banks changing default interest rates when people failed to make repayments, in the case of a drought the practice should cease under a proposed change to the banking code of practice.
Originally published as Banking Royal Commission: Everything you need to know
Viral bishop defends free speech against new laws
The outspoken bishop stabbed at the pulpit for his political views has panned new misinformation laws.
Almost 500 new homes to be built over Sydney Olympic Metro
Almost 500 new homes will be built on the new Sydney Olympic Park Metro precinct with major construction set to begin after the site was finally approved by the NSW government.