Banking Royal Commission Interim Report label the Banks as Greedy
Team Veye | 02-Oct-2018
The banking and financial services royal commission released its interim report on Friday, 28th Sep’18, covering various aspects of the Banking sector including consumer lending, financial planning, business lending, farm finance and Indigenous finance.
In the executive summary of the report, Commissioner Kenneth Hayne noted that the commission had exposed conduct by financial services firms that had attracted public condemnation.
Treasurer Mr Frydenberg addressed a press conference in Melbourne on Friday morning to release the banking royal commission’s interim report canvassing shocking revelations about misconduct in the financial sector unearthed over four months. He tweeted – “The Royal Commission’s interim report, released today, is a frank & scathing assessment of the culture, conduct & compliance in the financial sector.”
The interim report covered the first four rounds of hearings focusing on consumer lending, financial advice, loans to small and medium businesses, and banking conduct in regional and remote communities. The report found conflicts of interest in the delivery of financial advice, confusion about the roles and responsibilities of mortgage brokers and issues with the way banks deal with indigenous communities.
In this Interim Report these questions – ‘why’ and ‘what now’ – were asked with particular reference to banks, loan intermediaries and financial advice, with a view to provoking informed debate about both questions. Too often, the answer appeared to be greed – the pursuit of short term profit at the expense of basic standards of honesty.
Banks, and all financial services entities recognised that they sold services and products. Selling became their focus of attention. Too often it became the sole focus of attention. Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales. When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done. The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA too never went to court.
Although, the existing laws already require entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’, much more often than not, the conduct now condemned was contrary to law. So, passing some new law to say ‘Do not do that’ would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain? The report further seeks solutions to questions like “Should the existing law be administered or enforced differently?” Is different enforcement is what is needed to have entities apply basic standards of fairness and honesty: by obeying the law; not misleading or deceiving; acting fairly. There will be a further round of public hearings to consider these and other questions that must be dealt with in the Commission’s Final Report.
The commission is scheduled to table its Final Report on 1st Feb’19. As per a latest news update, after the royal commission's interim report have discovered that remuneration incentives were at the heart of every scandal it uncovered, the Finance Sector Union is calling for banker pay to be based only on customer service and compliance. This may force the banks to consider getting rid of sales-based incentives for all staff. Whatever the outcome maybe but the Australian banking system is in for a much needed overhauling by the Royal Commission and we hope what will emerge will be a more customer centric, clean and ethical system that will help re-build the trust of the nation in the Banking Sector.
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