Banking royal commission: Policy to take centre stage at seventh round of hearings

Ken Hayne has scheduled a seventh round of hearings to weigh potential fixes for the financial services sector.

*Fairfax Pool Images* The Royal Commission into the Financial Services Industry. 12 February 2018. The Age News. Photo: Eddie Jim. ( The Commissioner Kenneth Hayne )

The future of the financial system will become clearer in November, as the royal commission holds a fortnight of public hearings to consider appropriate ways to overhaul the scandal plagued financial services sector.

Kenneth Hayne’s year-long inquiry into the banking and financial services sectors will hold a round of hearings — its seventh — from November 19 which will focus on policy questions airing from the first six rounds of hearings the commission has held.

The November round will follow the publication of the royal commission’s highly anticipated interim report, which is due by the end of September. The interim report will exclude policy proposals from the upcoming hearings into the superannuation and insurance industries, in August and September, respectively.

But a November round of hearings will be held to publicly probe possible policy solutions to clean up the scandal-ridden industries. The royal commission is due to hand its final report to the government by 1 February next year.

The royal commission also said public submissions for instances of misconduct or conduct falling below community standards will also be closed at the end of September.

“After submissions close on 28 September 2018, the Commission will shift its attention from past experiences to proposals on what should be done in response to the issues raised or conduct uncovered within the banking, superannuation and financial services industry,” the royal commission said.

So far the royal commission has held hearings which investigated consumer lending, financial advice, business lending, farming finance and the treatment of Aboriginal and Torres Strait Islander customers. It is poised to hold hearings into the $2.6 trillion superannuation sector in early August and insurance in mid-September.

Mr Hayne is due to submit an interim report to the Governor-General not later than 30 September, which “is expected to identify a number of policy related issues arising from the commission’s public hearings to date” — excluding the upcoming hearings into superannuation and insurance.

The public will be able to make submissions to policy issues raised by the commission, which will be made public after the report is tabled in parliament.

“Those interested in commencing work on a submission in advance of the interim report being made available may wish to do so based on the issues already identified at the conclusion of each of the first four hearing rounds,” the commission said.

So far, the commission has received 7337 submissions from the public.

The royal commission has made it clear already it is interested in finding solutions that deal with the way remuneration and bonuses have encouraged misconduct and poor consumer outcomes. It has also targeted the entangled cross-ownership of businesses and address issues such as conflicted remuneration for financial advisers, the shunting of customers into in-house products and the breakdowns in compliance between parent companies and rogue financial subsidiaries. The relationship between banks and liquidators and receivers have also been probed, along with the lacklustre policies for preventing the gouging of indigenous customers. Directors of both industry and retail superannuation funds are expected to face a grilling on governance issues, whether the boards have acted in the best interests of members rather than union groups or shareholders, why failed mergers did not proceed and dealings between related parties and subsidiaries. The insurance sector is expected to be grilled on its dealings with natural disaster insurance and misrepresentation of what its insurance covers.

The royal commission has already prompted each of the major banks to start selling assets or overhaul divisions.

Since the royal commission started probing the banking sector, National Australia Bank has announced it will carve off its wealth management division MLC. Commonwealth Bank has added its mortgage brokers Aussie Home Loans and a stake in Mortgage Choice to the list of items on the chopping block. ANZ suspended its retail asset finance business while it runs the ruler over a potential sale, while Westpac this week shut shop on its lending to self-managed super fund customers. These steps come on top of the previously announced moves to extract the banks from the broader wealth management industry, in a flurry of announcements over the last two years.