The Banking Royal Commission has blamed greed by financial services providers and inaction by regulators for the range of issues it has uncovered during the first four rounds of hearings.<\/p>\n
The Commission released its interim report today, which covers the hearings related to financial advice but not life insurance, and in an executive summary accompanying the report stated the key questions were: why did the misconduct happen, and what can be done to avoid it happening again?<\/p>\n
In answering the first question, the summary explained, \u201cToo often, the answer seems to be greed \u2013 the pursuit of short term profit at the expense of basic standards of honesty\u201d, adding that it was necessary to go behind the events documented during the hearings to see how this behaviour developed.<\/p>\n
The summary noted that banks, and financial services providers recognised they sold services and products but \u201c\u2026selling became their focus of attention. Too often it became the sole focus of attention\u201d.<\/p>\n
\u201cProducts and services multiplied. Banks searched for their \u2018share of the customer\u2019s wallet\u2019. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales,\u201d the summary stated.<\/p>\n
It also criticised the regulators \u2013 ASIC and APRA \u2013 claiming they took little or no effectual action against banks and financial services provider, and what action was taken \u201c\u2026did not meet the seriousness of what had been done\u201d.<\/p>\n
\u201cThe conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court,\u201d the report asserted, criticising the approach taken by the regulators in the past.<\/p>\n
The summary noted that past misconduct has resulted in little more than in an apology from the financial services entity, a lengthy remediation program and negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking (EU) that recognised ASIC had \u2018concerns\u2019 about conduct of the company involved.<\/p>\n
It also claimed that penalties applied under infringement notices \u201c\u2026were immaterial for the large banks\u201d and community benefit payments made under an EU were \u201c\u2026far less than the penalty that ASIC could properly have asked a court to impose\u201d.<\/p>\n
In addressing the issue of what could be done to prevent the further misconduct the report rejected the imposition of more legislation to create better consumer outcomes stating, \u201cThe law already requires entities to \u2018do all things necessary to ensure\u2019 that the services they are licensed to provide are provided \u2018efficiently, honestly and fairly\u2019\u201d.<\/p>\n
The summary noted that \u201c\u2026the conduct now condemned was contrary to law. Passing some new law to say, again, \u2018Do not do that\u2019, would add an extra layer of legal complexity to an already complex regulatory regime\u201d.<\/p>\n
It concluded by questioning whether existing laws should be enforced differently to have financial services entities apply \u2018basic standards of fairness and honesty\u2019, to obey the law and to action in the best interests of consumers, adding, \u201cThe basic ideas are very simple. Should the law be simplified to reflect those ideas better?\u201d<\/p>\n
Click here<\/a> to access the Banking Royal Commission’s Interim Report, Volume 1.<\/p>\n
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