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Time to walk the Hayne talk

The success of the bank inquiry hangs on whether talk of putting customers first becomes more than mere lip service.

19/11/2018: Commonwealth Bank CEO Matt Comyn (C) leaving the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Sydney on Monday. Hollie Adams/The Australian
19/11/2018: Commonwealth Bank CEO Matt Comyn (C) leaving the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Sydney on Monday. Hollie Adams/The Australian

The Hayne Royal Commission report is not yet out and yet (amid all the trees destroyed in predicting its outcome) the story will be determined by the financial services industry’s reaction.

Without structural reform the common reaction is to say the right things and do nothing hiding behind the competition barriers that have allowed the big banks to rewards shareholders over customers and, in the process, line the pockets of executives.

The companies under the most pressure are AMP and IOOF, with their operating models under threat through their conflicted advice platforms.

IOOF is already a victim through an APRA crackdown and AMP has changed its chief executive and chair but Hayne could destroy its businesses.

The banks are all talking about putting their customers first but just whether this is more than lip service remains to be seen and this in turn will be the test of the success of the Commission.

This is the cultural change everyone is talking about which is truly extraordinary when you consider it is plain common sense for a company to put its customers first.

Executive pay will be hit and what Hayne says will serve as the front runner to the APRA report on compensation due in March.

The bit big business has failed to handle is actual accountability, holding people responsible for what has gone right and wrong.

Having failed, the banks will now find out what Hayne thought should have happened.

This means potential criminal action against senior bankers which in turn will fast forward cultural change.

ASIC and APRA have clearly failed by not holding the institutions responsible and some sort of review mechanism should now be established.

Ultimately, the government is also responsible for these failures and it is extraordinary that more than three years after agreeing with David Murray’s FSI recommendations, including an external review of APRA, nothing has been done.

Treasurer John Frydenberg will attempt to manage the political framework of this report but will do so against a backdrop of basic incompetence from the government in not following through on the recommended reforms.

This is a failing of the government not the make up of the parliament.

Hayne’s words will be out shortly but their impact will depend on just how both Canberra and industry act rather than in what they say.

This inquiry has been into financial misconduct and the evidence has been provided by the industry and the regulators which is a good first step. Now comes the action.

Read related topics:Bank Inquiry

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Original URL: https://www.theaustralian.com.au/business/opinion/john-durie/time-to-walk-the-hayne-talk/news-story/cdf29a3aac0081d218794e2e54f323cd