Banking royal commission: commissioner Hayne puts banks to shame over greed

Financial services royal commissioner Kenneth Hayne has damned the greed of big banks in a day of shame for the sector.

Financial services royal commissioner Kenneth Hayne.

Financial services royal commissioner Kenneth Hayne has damned the greed of Australia’s big banks in a day of shame for a sector he described as believing it was above the law.

In a 1000-page interim report, Mr Hayne said banks and other ­financial institutions may have committed crimes.

He slammed weak financial regulators for lazy responses to ­serious misconduct as he laid out details of systemic gouging and misbehaviour committed in a ­relentless pursuit of profit.

Criminal prosecutions against under-siege wealth manager AMP are now being raced towards litigation as the royal commission stuns the sector with scathing findings of misconduct rife throughout the top ranks of corporate Australia.

Mr Hayne has revealed the corporate watchdog is poised to charge AMP over its alleged misleading of the regulator over the fees-for-no-service scandal that has already cleaned out the company’s top ranks.

The imminent action foreshadows a potential raft of criminal and civil litigation that could be launched against the country’s financial giants, such as Commonwealth Bank and ClearView Wealth, which the royal commission revealed engaged in conduct that breached numerous laws — but for which the Australian Prudential Regulation Authority and the Australian Securities & Investments Commission had failed to take them to court.

During the commission, CBA admitted 13,000 criminal offences by failing to transfer members from a high-fee fund to a low-fee MySuper fund by the 2014 deadline, while independent insurer ClearView confessed to breaching criminal anti-hawking provisions more than 300,000 times by targeting poor Australians with unwanted life insurance policies.

Despite the commission demonstrating how companies seriously breached the law, ­financial regulators had either failed to build strong cases against them or negotiated weak penalties.

Bank bosses yesterday rushed to promise better behaviour following the exposure of disgraceful industry practices that included charging fees to the dead, lying to the corporate regulator and pushing ­insurance on to vulnerable Aboriginal people in remote ­communities.

Yesterday’s report, described by Treasurer Josh Frydenberg as “frank and scathing”, made no policy recommendations and dealt with only the first four rounds of the commission’s seven hearings so far. However, Mr Hayne suggested Australians would be better served by an industry bound by simpler financial services laws that were enforced by watchdogs with real powers.

Mr Hayne said banks had put profits before customers, that selling had become their “focus of ­attention” rather than service, and bankers chasing a bigger share of a customer’s wallet won big bonuses. “From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales,” Mr Hayne said, as he tried to explain why the country had been beset by so much conduct that had brought “condemnation”.

“Too often, the answer seems to be greed — the pursuit of short-term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained?” he said.

Speaking after the report was tabled in parliament, Mr Frydenberg said “Australians expect and deserve better” from their banking system. Taking aim at watchdogs ASIC and APRA, he said insignificant penalties and weightless legal threats were “clearly unacceptable and cannot continue”.

He twice repeated Mr Hayne’s finding that: “Too often, entities have been treated in ways that would allow them to think that they, not ASIC, not the parliament, not the courts, will decide when and how the law will be obeyed or the consequence of the breach remedied.”

The release of Mr Hayne’s report has set the stage for a federal election clash over ASIC funding.

The Coalition, which has been beset by criticism over its repeated refusal to hold the royal commission until the big banks asked for it in November, is ramping up its push for greater financial penalties for corporate crime as it tries to deflect Labor attacks on its cutting of ASIC’s budget in 2014.

Acting Labor leader Tanya Plibersek said a future Shorten government would set up a “financial services royal commission ­implementation taskforce” to “reform the culture of profit over people”. A spokesman for the Treasurer said the government had already set up a taskforce and was internally recruiting.

Mr Hayne blasted financial services group AMP, which lost its chairman and chief legal officer after a disastrous appearance at the commission, for misleading ASIC over a scandal in which it charged fees to people who got nothing in return.

He said AMP may have committed crimes by doing so, noting the regulator was considering charges. The chief executives of the big four banks pledged to take on the findings and improve customer outcomes.

“Today is a day of shame for Australian banks,” said Australian Banking Association chief executive Anna Bligh. “There is nothing in this report for banks to feel proud of. The very human factor of greed may well have had a part. There is no place for greed in the Australian banking system.”

Commonwealth Bank chief executive Matt Comyn said the report was “rightly critical of our industry and our bank”, while Westpac boss Brian Hartzer said the group was now “focused on learning from the mistakes of the past and preventing them from happening again”.

“It is difficult to face the statement of ‘profits before people’, but this is exactly what we need to confront,” said National Australia Bank chief executive Andrew Thorburn.

ANZ boss Shayne ­Elliott said the interim report represented a “critical moment” for his industry and his bank to tackle the “urgent work required to fix the significant failures highlighted by the ­commission”.

Mr Hayne castigated ASIC for settling for measly fines and failing to take the banks to court regularly and, in the case of APRA, at all. “When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done,” Mr Hayne said.

ASIC chairman James Shipton said the report made “serious and important” observations about ASIC’s role as a regulator.

APRA refused to comment.