TODAY |

Australian banks carry the blame for industry's widespread greed-driven misconduct, royal commission finds

Banks and the people who run them carry the blame for the industry's widespread greed-driven misconduct, a royal commission into the Australian banking industry says.

Banking royal commissioner Kenneth Hayne QC says the time has come to address financial misconduct and prevent its recurrence, proposing a raft of measures designed to better protect consumers.

Mr Hayne has made 24 referrals, including all the major banks except for Westpac, to the Australian Securities and Investments Commission and Australian Prudential Regulation Authority for further investigation.

A number of matters heard by the commission are already before the regulators.

He has left it up to the regulators he criticised for letting much of the misconduct go unpunished to decide on any action, meaning anyone expecting criminal charges will have to wait.

Mr Hayne's final report was handed down today, and included 76 recommendations and scathing criticisms of industry players.

While some have tried to blame misconduct on a few bad apples, Mr Hayne's final report makes it clear that the buck stops with the banks and other financial services companies, their boards and senior executives.

Banks are accused of putting “profits above people” in a damning interim report released by the royal commission. Source: 1 NEWS

"There can be no doubt that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and those who managed and controlled those entities: their boards and senior management."

Mr Hayne was scathing of some bank bosses, particularly the National Australia Bank, for being unwilling to accept responsibility.

"It seemed to me that there remain elements of unwillingness to recognise, and to accept responsibility for, poor conduct of the kinds examined in this inquiry," he said.

Mr Hayne said he was not confident NAB had learned the lessons from the past as he criticised its CEO Andrew Thorburn and chair Dr Ken Henry, a former Treasury secretary.

He said Mr Thorburn treated the charging of fees for no service as nothing more than carelessness combined with system deficiencies.

"The amounts of money that just 'fell into the pocket' of so many large and sophisticated financial entities, the number of times it happened, and the many years over which it happened, show that it cannot be swept aside as no more than bumbling incompetence or the product of poor computer systems," Mr Hayne said.

Overall compensation over the fees-for-no-service scandal across the financial services industry, which has included charging dead customers' estates, is expected to top NZ$1.04 billion.

Among his recommendations, Mr Hayne is calling for the law to be changed to require annual renewals of ongoing advice fee arrangements.

He also wants unsolicited cold calls or "hawking" of insurance and superannuation banned and says there is no justification for keeping grandfathered commissions for financial advisers.

A compensation scheme of last resort for consumers, a proposal put on hold during the one-year inquiry, will go ahead with Mr Hayne and the government's backing.

Mr Hayne dismissed fears that moves to ensure banks are lending money responsibly could lead to a credit squeeze and hurt the economy.

He said the steps taken by banks to strengthen their home lending practices and reduce their reliance on a conservative expenses measure were to improve their compliance with consumer laws.

"If this results in a 'tightening' of credit, it is as a consequence of complying with the law as it has stood since the NCCP Act came into effect," the report said.

Mr Hayne backed Treasury's observation that if appropriately managed, ensuring the industry consistently meets the requirements of existing laws will likely enhance the economy rather than detract from it.

"The financial services industry is too important to the economy of the nation to allow what has happened in the past to continue or to happen again."

A spokesman for the New Zealand Banking Association said the chief executive, Roger Beaumont, would not speak to 1 NEWS on camera.

In a written statement, Mr Beaumont said New Zealand banks were focused on reporting back to the Reserve Bank and FMA on their conduct and culture review. 

“While the FMA and RBNZ review into banking conduct last year found no evidence of widespread misconduct, the industry believes that trust is central to customer relationships and welcomes any moves to improve this.

“We will also work closely with the government on the recently announced fast-tracking of regulation for further customer protection in the financial sector.”

“We also expect banks here will have a look at the Australian report for any relevant insights.”
 


Australian money background showing $100, $50 and $20 notes.
Australian money background showing $100, $50 and $20 notes. Source: istock.com