Devastating indictment of greed, incompetence and corruption
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry found widespread delinquency, even criminality, in the dealings of bank boards and management
- First published February 4, 2019
Kenneth Hayne could not have been clearer in his message to government. There is a crisis of confidence in the banking and finance sector and trust needs to be urgently restored. Whether this can be achieved, however, is questionable.
At the heart of Hayne’s final report is a finding that, while the foundations of Australia’s financial system remain sound, it is a sector that has been perverted by institutional corruption and in some cases criminality.
An equally damning indictment was made of the regulator, which has failed in its charter to prosecute misconduct and protect consumers from the worst of the banking atrocities.
But the recommendations are sober. There is little in the report that can be seen as having broader consequences for the economy.
And for the government, there is no call for real structural reform of the sector. If anything, most of the recommendations are around the fringes. Nevertheless, the extent of the delinquency by the banks, their boards and senior management has ensured this has become a first-order election issue.
Josh Frydenberg has tried to give the appearance of a government acting decisively by committing to acting on all 76 recommendations.
“My message to the financial sector is that misconduct must end and the interests of consumers must now come first. From today the sector must change, and change forever,” the Treasurer said. The reality is there is little in the reforms suggested by Hayne that will be difficult to implement. If anything, the report was more cautious than expected.
This hasn’t stopped the government from now claiming to have been given the moral authority to not only pursue reforms already before parliament that Labor is blocking but to impose a more punitive legislative framework.
It has also promised a consumer compensation scheme for people subjected to maltreatment.
So far the government hasn’t overreacted.
There is a real danger, however, that the political contest that has been triggered could result in election-frenzied overreach with unintended or unforeseen consequences.
This will now be largely determined by what Labor’s response will be to the findings.
If the current political climate remains unchanged, Opposition leader Bill Shorten’s response becomes critical, given it is likely to be a Shorten government that delivers the reforms.
There will be a great temptation for Shorten and his Treasury spokesman, Chris Bowen, to respond by bashing into the banks and the finance services industry even further.
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