Banking royal commission: Taxpayer and customer costs sure to rise from all this box-ticking

If the big consulting firms were listed companies, their share prices would have surged yesterday too, the first trading day following the release of the recommendations of the Hayne royal commission.

Compliance and bureaucracy were big winners along with the banks and wealth giants, thanks to a thicket of new reviews and compliance measures.

“There are relatively few changes to the law; no meaningful structure changes to the industry; no radical changes to the regulatory model,” said analysts at Citi, reflecting a widespread view that Kenneth Hayne’s 76 recommendations amounted to a once-over lightly for the nation’s wealth giants.

Macquarie analysts were right to highlight “increased compliance costs and costs of doing business” too, along with “near-term upside for banks and wealth managers” that included the biggest share price jumps in a decade.

For bureaucracy, there’s more in the offing than just a new “independent oversight authority” (recommendation 6.14), bolstered by a “permanent secretariat” that would report to government “at least biennially”.

Each of APRA and ASIC will face at least “quadrennial reviews” of their “capability”, which could be conducted by “appointing an expert panel” (6.13), probably drawn from the public sector itself. Moreover, they will have to furnish “joint memoranda” (6.10) every two years on how they are co-operating.

Fingers crossed there’s enough time, after emailing each other about how to implement BEAR across the entire financial system (6.6, 6.8), left to regulate the actual sector.

Meanwhile, Treasury can get its teeth into a universal terms review (4.13) to examine “the likely pricing effects of universal key definitions, terms and exclusions for default MySuper group life policies”. Count me out of that one. A new Treasury working group for monitoring mortgage broker remuneration (1.4) might be more fun.

If these finish too soon, “a review by government in consultation with ASIC of the effectiveness of measures … implemented by government ... to improve the quality of financial advice” can pick up the slack “in three years” (2.3).

Financial advisers — while furiously checking annually rather than biennially (2.1), whether their clients still want them — will have to register with “a new… single, central, disciplinary body” (2.10). The nation’s 17,000 mortgage brokers will be governed by rules that apply to financial advisers (1.5) too, and both will need to report quarterly to ASIC on any “compliance concerns” (2.8).

Flat out with the extra compliance, they might need consultants to draft new industry codes that will be mandatory and have force of law (1.15).

Prices will be steep though, given reviews by “all financial service entities, at least one a year” of “the design and implementation of remuneration systems for frontline staff” won’t write themselves (5.4).

It’s not all vulgar analysis of bonuses though: frequent reviews of “culture” by “all financial service entities” (5.6), and APRA’s need to “build a supervisory program focused on building culture that will mitigate risk … (and) assess the cultural drivers of misconduct” will leave plenty of room for blue-sky thinking (5.7).

Whether all this box-ticking and production of glossy pdfs about abstract nouns improves outcomes remains to be seen, but it will certainly increase costs for customers and taxpayers.