By Nugget’s News
The interim report of the Banking and Financial Services Royal Commission was handed down this afternoon, and it couldn’t have been more scathing.
In the report’s executive summary, Commissioner Kenneth Hayne said the Commission’s work had so far “shown conduct by financial services entities that has brought public attention and condemnation.”
Addressing the question of why that happened, the Commissioner had one clear answer.
“Too often, the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty,” he said.
“How else is charging continuing advice fees to the dead to be explained?”
The Commissioner said banks and all financial services entities recognised that they sold services and that “selling” too often became the sole focus of attention.
“Products and services multiplied. Banks searched for their ‘share of the customer’s wallet,’” Mr Hayne said.
“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.”
In response, the Finance Sector Union of Australia said it welcomed the release of the report and in an important step in reforming the financial services sector.
“We agree … that the culture, conduct and compliance of many of our financial institutions fall well below community expectations and standards,” said FSU National Secretary Julia Angrisano.
‘We know how that greed was able to spiral out of control.
“It was because of conflicted remuneration, a sales culture that put profits before people and senior bankers and executives of financial corporations who were content to ride the gravy train of multi-million dollar salaries and bonuses.”
Earlier in the day, the University of Sydney released a series of quotes from its top experts, who all had plenty to say. I have chosen to include them all here:
Associate Professor Shumi Akhtar, University of Sydney Business School
“The inquiry has revealed how widespread financial crime has been in the banking and superannuation industry for so long. It also shows how inefficient our financial institutions have been – and continue to be – without the government taking any legitimate steps to resolve the issues. Excessive fees damage retirement savings dramatically over time once compounding interest is taken into account.”
Professor David Kinley, Chair of Human Rights Law, Sydney Law School
“Above all else what the Royal Commission has achieved is to humanise banking bastardry. Our erstwhile ‘ho-hum’ acceptance that while banks are likely ripping us off here and there, it’s just the price we pay for financial convenience and security, has been well and truly exposed as the self-delusion it is. The inquiry’s lid-lifting on the breadth and depth of conniving practices buried in small print, or worse, deliberately hidden from customers by artful deception, has shocked Australians out of their complacency.”
Professor Gail Pearson, University of Sydney Business School
“This is no longer a question of ‘culture’, nor a question of ‘restoring trust’. The financial institutions must fundamentally change the way they do business. They should reconsider their governance practices, eradicate conflicts of interest from top to bottom and reform their remuneration structures.”
Professor Susan Thorp, Professor of Finance, University of Sydney Business School
“The Royal Commission has exposed widespread failures to act in the best interest of members related to conflicting incentives operating on trustees and managers. These failures have included charging advice fees when no advice service was delivered and taking excessively long times to transfer members to low-cost default (MySuper) funds.”
Eliza Wu, Associate Professor in Finance, University of Sydney Business School
“Australian financial institutions will have to work very hard to regain the trust of the public and to rebuild much goodwill with the ‘warts and all’ that have been uncovered as part of the Royal Commission into Misconduct in Banking, Superannuation and Financial Services industry. The remuneration structure and service charges within the financial services industry must change going forward to help to restore trust within the entire sector.”
NUGGET’S NOTE: The Banking Royal Commission isn’t over. There will be a further round of public hearings to consider what must be dealt with in the Commission’s Final Report.