Australia reacts to bombshell banking royal commission report

The government has kept dodging one question about the banking royal commission. This morning Malcolm Turnbull took it head on.

The long-awaited final report of the banking royal commission was released on Monday.

Commissioner Kenneth Hayne recommended sweeping changes for the troubled sector. You can read his key points here.

This is how the main players reacted.

MALCOLM TURNBULL

Malcolm Turnbull was prime minister and Scott Morrison treasurer when the government was resisting calls for a royal commission.

Speaking in Melbourne this morning, Mr Turnbull was asked whether he regretted that opposition — a question Josh Frydenberg has repeatedly brushed aside with criticism of Labor.

“I do,” Mr Turnbull admitted. “I think we should have got on with it earlier.”

The former prime minister said he and Mr Morrison were working on a compensation scheme for the banks’ customers at the time, and felt a royal commission would delay it.

“I could see that the problem was a failure of responsibility and trust, and I wanted to get on with it and deal with it quickly,” he said.

“We were well advanced with a compensation scheme to deal with the victims of various bank malpractices, I suppose, is the best way to describe it. And that was put on hold when the royal commission was set up.

“So I expect that Scott Morrison will dust that off and get back out there.

“We weren’t seeking to protect the banks. Our approach was to act as swiftly as we could to ensure that people who had been wronged were compensated, that people who had done the wrong thing were held to account, were prosecuted.

“You can make a very good case for saying it was started perhaps a year later than it should have been, or 18 months later than it should have been.

“I believe, with the benefit of hindsight, that we should have held the royal commission earlier.”

.@TurnbullMalcolm: @ScottMorrisonMP and I were well advanced with a compensation scheme so I expect he will dust that off. We weren't seeking to protect banks contrary to what @AustralianLabor would have you believe.

MORE: https://t.co/GTLbtBm23H #AMagenda pic.twitter.com/m5pa2w2MIj

— Sky News Australia (@SkyNewsAust) February 4, 2019

Mr Turnbull urged the banks to work in the interests of their customers, comparing their job to that of a doctor advising a patient.

“You get back to this fundamental point. It’s really about trust,” he said.

“You’ve got to put yourself in the shoes of the customer and ask yourself, is this the best thing for my customer?

“Just as when a doctor gives you advice about whether you should have a particular procedure or whatever, as a layman you don’t know very much about it.

“The problem with banking, increasingly now, is that the customer has a very low level of knowledge. So it’s incumbent on the bank and the financial adviser to really put that customer first.

“You’ve got to believe that when the bank says ‘invest in this’ or ‘take this loan’, that they’re acting in your best interest.”

Asked whether the big four banks’ bosses — particularly NAB’s CEO Andrew Thorburn and Chair Ken Henry, who copped Mr Hayne’s most withering criticism — Mr Turnbull was diplomatic.

“There’s always the cry heads must roll. Leaders obviously have to take responsibility, but I think the most important thing is to make sure that if people have committed offences or crimes, they should be charged, yes, but the banks have to change their culture.”

Finally, he delivered a ringing endorsement of former Liberal MP Julia Banks, who has signalled her intention to challenge Health Minister Greg Hunt in Flinders at the election.

“Julia Banks is an outstanding parliamentarian. She came to parliament with a life’s experience as a lawyer in the business world, she is really an outstanding representative,” Mr Turnbull said.

“I respect the decisions she’s taken and I believe the people of Flinders will have a very stimulating contest between her and Greg Hunt.”

Former prime minister Malcolm Turnbull. Picture: AAP

THE GOVERNMENT

Treasurer Josh Frydenberg promised the government would take “immediate” action on the report’s recommendations.

“My message to the Australian community today is that your government is committed to making this happen. In responding to this report and taking action on all 76 recommendations, we are putting in place the legislative framework which provides the regulators with the powers and the resources to hold those who abuse our trust to account,” he said.

During his press conference, Mr Frydenberg responded to the key criticism the government is facing — that it resisted a royal commission for too long.

“Treasurer, were you wrong to oppose a banking royal commission for 16 months? And given that history, why should voters trust you now to act on this report?” one reporter asked.

“Well, we could debate for hours the failures when Labor was last in office,” he replied.

“I recall Bill Shorten saying how fantastic the sector was when he was the minister for the sector. But he didn’t call a royal commission or take action to bring these big banks to account. He didn’t put in place new standards, which we have announced today, and have been doing since the Financial System Inquiry was initiated by this government when we first came to power in 2013.”

Speaking on Today this morning, Mr Frydenberg again had to dodge questions about why the Coalition voted against the banking royal commission for so long.

“Why should we trust a government that had to be dragged into this investigation in the first place?” Today host Georgie Gardner asked the Treasurer.

Mr Frydenberg replied: “Actually Georgie we’ve been making a number of significant reforms since coming to government in the financial sector” pointing to the inquiry headed by David Murray.

“I send a very firm message to all those in our financial services sector...that not only that they can do better, they must do better,” he said.

Mr Frydenberg said he had reservations about one of the recommendations on mortgage brokers.

“There is a question of whether we should stop up front fees from the lender to the mortgage broker,” he said.

“What we are concerned about is the impact on competition. We don’t want the work that is now currently with 25,000 small businesses and people working within the mortgage broking industry just simply to go to the big banks. We don’t want to give the big banks a free kick.”

Treasurer Josh Frydenberg. Picture: AAP/Mick Tsikas

THE OPPOSITION

Needless to say, Labor didn’t accept Mr Frdenberg’s answer about the action the Coalition has taken on the financial sector.

“Scott Morrison and the Liberals should be condemned for voting against the banking royal commission 26 times,” Bill Shorten and Chris Bowen said in a statement.

“Mr Morrison called the royal commission ‘regrettable’, a ‘populist whinge’, delayed action for more than 600 days, and wants to give the big banks a $17 billion handout.

“The Liberals have shown they cannot be trusted to clean up the banks. They are too out of touch and only stand up for the top end of town.”

They described Mr Hayne’s report as a “dark day for Australian banking” and a “terrible indictment on the greed in the industry”.

“We pay tribute to the victims of banking misconduct, the whistleblowers and the advocates for making this day happen.”

Shadow Treasurer Chris Bowen. Picture: AAP

COMMONWEALTH BANK

CBA CEO Matt Comyn said the bank would “work through the impact” of Mr Hayne’s recommendations over the next few days.

“We note that the commissioner has concluded that a number of matters regarding the Group’s conduct, including in relation to superannuation, warrant further investigation by relevant regulators and we will co-operate fully with these investigations,” Mr Comyn said.

“We will update the market as appropriate, noting that we will release our half year results on Wednesday.

“The Royal Commission has been a thorough and valuable process for everyone — bank customers, financial services institutions, regulators and policy makers. It has highlighted failings both in our business and across the wider financial services industry.

“As challenging as the Royal Commission process has been, CBA will be a better bank as a result.”

Mr Comyn said the bank was addressing its “past failings” and implementing important changes, including a new Code of Conduct.

“There is still much work ahead to earn back trust, but we are determined to restore broad respect and support for the important role that a major financial institution like CBA has to play in our economy and community.”

Picture: Hollie Adams/The Australian

NAB

NAB’s response yesterday was significantly shorter, saying only that it would review the report.

“National Australia Bank notes the release today of the final report of the royal commission into the banking, superannuation and financial services industry and the federal government’s response.

“NAB will now review the report, which contains 76 recommendations, and the government’s response to fully understand the implications for the NAB Group.

“We will provide further updates as appropriate.”

This morning CEO Andrew Thorburn released his own personal video statement - a format that allowed him to avoid questions from reporters.

“I and we embrace the ambition and the recommendations contained within the report,” Mr Thorburn said.

“But there is clearly more work to do for us at NAB. We are taking steps to earn your trust through action, and now we will need to work through this report and implement the recommendations.

“We want to earn your trust, we want to get better.”

Mr Hayne singled out NAB in his report, saying it “stands apart” from the other three major banks and taking aim at its Mr Thorburn and Chair 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 said.

“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.”

A message to our customers: We understand earning your trust is not about words, it's about action. And we're determined to show you how we're changing to be a better bank. pic.twitter.com/TuASiN4ylk

— Andrew Thorburn (@AndrewThorburn) February 4, 2019

THE UNION

The Finance Sector Union said Mr Hayne’s bark “has proved to be worse than his bite”.

“These are mostly cosmetic changes rather than structural. Some media describe the recommendations as ‘explosive’. If explosive is a penny bunger rather than a stick of dynamite, then maybe,” the union said.

“It looks like Hayne is a big fat nothingburger in respect to executive pay and bonuses.

“It looks like Hayne has squibbed it on self-regulation. We can hear the champagne corks popping.”

The union did welcome the recommendation to end grandfathered commissions, reform fees and require mortgage brokers to work for the best interests of borrowers.

THE REGULATORS

Mr Hayne criticised regulatory agencies, particularly ASIC, for failing to sufficiently enforce the law.

In response, ASIC said it “will consider the report carefully”.

“The Royal Commission report identified ASIC’s enforcement culture as the focus of change needed at ASIC. This focus accords with ASIC’s change agenda, that has included the adoption of our ‘why not litigate?’ enforcement stance, the initiation of our Internal Enforcement Review and the enhancement of our governance structures,” it said.

“ASIC notes the serious matters referred by the royal commission of possible breaches of financial services laws. Consideration of these matters will be prioritised. ASIC does not, as a general policy, comment on actual or potential investigations.”

The Australian Prudential Authority struck a similar tone.

“The commission’s final report is a considered and fair assessment of failings in the financial system and a helpful road map for reform,” chairman Wayne Byres said.

“The commission’s recommendations are wide-ranging. Within them, the commission has identified a number of areas where APRA’s prudential and supervisory framework can and should be strengthened.

“Many of these improvements are already in train, and APRA is committed to delivering on them. APRA appreciates the commission’s acknowledgment that increasing the intensity of supervision will require additional resources.”

THE BANKING ASSOCIATION

Former Queensland premier Anna Bligh, who is now CEO of the Australian Banking Association, admitted the report “lays bare how banks have too often failed their customers and let down the Australian people”.

“Banks understand that these failures have caused deep hurt, suffering and heartache for far too many customers and they’re sorry for the pain they have caused,” Ms Bligh said.

“Importantly, banks accept full responsibility for these failings and they know that they must now change to ensure that this never happens again.”

She said the banking industry had already formed a special taskforce to start fixing its problems.

“The industry sees this report as a road map. It is a road map to drive the change that is needed to earn back the trust of the Australian people. Today is an opportunity for banks to reset their relationship with their customers.”

Asked about the report’s recommendations about mortgage brokers — for example, requiring them to be paid by borrowers, not lenders — Ms Bligh was more circumspect.

“We’ve only had a chance to look at this for about 3.5 hours,” she said.

“There are some recommendations that we’d like to take the time to look at in more depth to make sure that they are in the best interests of customers. One of those is in the area of changes to mortgage broking payments.

“I think there are some very radical suggestions here that need some very careful thinking before they are rushed into.”

Australian Banking Association CEO Anna Bligh. Picture: AAP/Mick Tsikas

BUSINESS

Business Council chief executive Jennifer Westacott called Mr Hayne’s recommendations “common sense but far-reaching”.

Our financial services sector is incredibly important to our way of life. Australians cannot be subjected to a system where they cannot access a loan to buy a new home or set up or expand businesses that provide jobs. Millions of Australians also have their retirement savings invested in banks,” Ms Westacott said.

“We look forward to working with political leaders and the community to ensure Australia’s financial system is stronger, and restoring trust in a sector which has helped to deliver a record 27 years of economic growth.”

She said it was important to make sure any changes are carefully considered before they are implemented, to ensure credit remains available to Australians and competition is strengthened.

“This means changes should be staged with appropriate consultation and reviewed to make sure consumers are better off.”