At 4:20pm today the final report of the Banking Royal Commission will be released. The commission’s conclusions and recommendations are likely to have far-reaching consequences for Australia’s financial industry.
While we wait, let’s look at some key areas.
Royal commissioner Kenneth Hayne QC has blamed greed for the extensive misconduct in the financial services industry, as reported by AAP.
In his interim report Mr Hayne said short-term profit has been pursued at the expense of basic standards of honesty.
Banks have arrived at the edge of what’s permitted and gone beyond that threshold. They did this because they could, and because they gained financially from the misconduct, says Mr Hayne.
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Final report highlights misconduct
We have seen months of appalling headline grabbing updates about customers being charged fees for financial advice and services they never received. The unfulfilled services come to as much as $1 billion dollars’ worth.
Mr Hayne called the conduct dishonest and inexcusable.
So it’s likely that the final report will put this $1 billion problem under the microscope, speeding up payment of compensation and enhancements made to systems to stop it happening again.
After the interim report the Australian Banking Association will announce changes to its new industry code to end fees for no service and stop charging deceased estates, AAP reports.
Much of the misconduct has gone unpunished, as weak regulators are charged with dealing with financial services companies that appear to think the law only applies when and if they chose to follow it.
Rather than simply bring in new laws, Mr Hayne calls for strong regulators, capable of ensuring existing financial services laws are enforced and obeyed.
‘Passing some new law to say, again, ‘do not do that’ would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain?’
Mr Hayne slammed ASIC and APRA for failing to mark and enforce the bounds of permissible behaviour, saying the misconduct either went unpunished or the consequences did not meet the seriousness of what occurred, as reported by AAP.
Both regulators have pledged to be tougher.
ASIC is now planing to take criminal and civil action more often, instead of negotiating resolutions with the big banks and others.
Fallout of misconduct
But who will really bear the brunt of the fallout from the Banking Royal Commission?
Well, that would be you…
Any typical Australian family trying to get a loan will find that regulators have made banks tighten lending standards, with the royal commission putting a spotlight on making sure money is lent responsibly.
After Mr Hayne’s recommendations, we’ll probably see the availability of credit restricted further.
And rather than depending on the common use of benchmark expenditure measures, banks will most likely have to do more to confirm potential loan customers’ income and their actual living expenses.
Mr Hayne may also look to significant changes for brokers and other intermediaries in the home loan industry.
‘He said reforms to broker remuneration agreed to by the industry, such as eliminating volume-based commissions, are limited and do not deal with the basic problem of people being encouraged to borrow more than they need.’
The final report will also have substantial complications for both insurance and superannuation industries, as well as their regulation.
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