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Banking royal commission releases interim report

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EXPLAINER: Banking royal commission interim report due

TREASURER Josh Frydenberg has delivered a scathing rebuke to financial institutions for their “greed”-driven misconduct — and the banking regulator for not doing enough to punish poor behaviour.

Mr Frydenberg was speaking today at a press conference in Melbourne to release the banking royal commission’s interim report canvassing shocking revelations about misconduct in the financial sector unearthed over four months.

The interim report covers 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. The report also pointed to a significant cultural problem.

“The interim report delivered today to the Governor-General shines a very bright light on the poor behaviour of our financial sector,” Mr Frydenberg said.

“Banks and other financial institutions have put profits before people, greed has been the motive as short-term profits have been pursued at the expense of basic standards of honesty. Too often simply selling products has become the sole focus of attention.”

Mr Frydenberg said the culture and conduct was reflected in the banks’ remuneration practices, with “almost every piece” of misconduct identified in the report “connected directly to some monetary benefit”.

He said the report made it clear that, while behaviour was poor, “misconduct either went unpunished or the consequences did not meet the seriousness of what has been done”.

Deputy Leader of the Opposition Tanya Plibersek said the interim report was “damning” but she saved her criticism for the government.

“Scott Morrison wanted to keep this shocking misconduct by the banks secret from the Australian public,” she said. “This is the report that Scott Morrison never wanted.

“Scott Morrison called (the commission) ‘a reckless distraction’, ‘a QC’s complaints desk’ and ‘a populist whinge’.”

She said a Labor Government would extent the royal commission to hear the testimony of more victims.

Anna Bligh, the former Queensland Premier and now CEO of the Australian Banking Association, also lashed the industry.

“Make no mistake, today is a day of shame for Australia’s banks,” she said.

“Having lost the trust of the Australian people, we must now do whatever it takes to earn that trust back.”


In his report, Commissioner Kenneth Hayne, QC, said the Australian Securities and Investments Commission “rarely went to court to seek public denunciation of and punishment for misconduct” while the Australian Prudential Regulation Authority “never went to court”.

“Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn-out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct,” Mr Hayne said.

“Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that ASIC could properly have asked a court to impose.”

Mr Hayne said “too often, entities have been treated in ways that would allow them to think that they, not ASIC, not the parliament, not the courts, will decide when and how the law will be obeyed or the consequence of the breach remedied”.

Mr Frydenberg said this was “clearly unacceptable and cannot continue”.

The report also raised the question of whether existing laws should be administered or enforced differently, and whether new laws should be introduced or the system should be simplified.

“The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’,” Mr Hayne said.

“Much more often than not, the conduct now condemned was contrary to law. 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 Frydenberg said the report did not include specific recommendations or referrals to appropriate agencies for enforcement.

“This interim report is a frank and scathing assessment of the culture, conduct and compliance of our financial system,” he said. “Australians expect and deserve better.”


It comes after Prime Minister Scott Morrison denied the inquiry had been too short, saying Mr Hayne had not asked for an extension. “If he asked for an extension then he will get one,” Mr Morrison told reporters in Sydney today.

“I think that the royal commission has been very vigorous in looking at the details of all of these quite heartbreaking cases for many Australians and being given them the weight that is necessary.”

Out of nearly 9400 submissions, only 27 victims have given evidence so far. Not covered in the interim report were superannuation and insurance, canvassed in the fifth and sixth rounds of hearings.

The seventh round, focusing on public policy questions arising from the revelations, will begin on November 19 in Sydney.

Labor wants the royal commission extended so thousands more victims can tell their personal stories. Labor spokeswoman Clare O’Neil says the commission needs time to visit regional areas.

To date, the government has introduced a banking executive accountability regime, increased civil and criminal penalties for financial misconduct, set up a one-stop shop to resolve complaints, appointed a “special prosecutor” and given ASIC $70.1 million for a revamped strategy and enforcement.


National Australia Bank CEO Andrew Thorburn said the interim report was “thorough” and “diligent”.

“I have had the opportunity to read the summary of the Royal Commission interim report and will review the report in more detail over the weekend. I would like to thank the Commissioner for his thoroughness and diligence,” Mr Thorburn said.

“For us at NAB, where we have made mistakes or done the wrong thing, we will own them and fix them. It is difficult to face the statement of ‘profits before people’, but this is exactly what we need to confront. Banking was built on putting people first and earning the trust of customers. We must return to these principles once again, rather than continuing to be short term managers.”

ANZ CEO Shayne Elliott said now was the time to “fix the failures” of the financial system.

“today commented on the release of the Royal Commission into Misconduct in the Banking,

“This is a critical moment for the industry, our bank and our people to continue the urgent work required to fix the significant failures highlighted by the Commission,” Mr Elliot said.

“We ­accept responsibility and we are determined to improve.”


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