Australian banking in a right royal mess

Report excoriates a sales culture that resulted in poor outcomes for clients

Kenneth Hayne’s report recommends that commissions should be largely eliminated from the financial sector, including mortgage broking, financial planning and insurance sales. Photograph:  Mick Tsikas/Reuters

Kenneth Hayne’s report recommends that commissions should be largely eliminated from the financial sector, including mortgage broking, financial planning and insurance sales. Photograph: Mick Tsikas/Reuters

 

Australia’s royal commission into its banking and finance industries was a long time coming. In 2009, the Australia and New Zealand Banking Group paid hundreds of millions of dollars in a settlement to investors.

For years after that, there were regular reports about sharp practices at financial institutions and hundreds of millions of dollars was paid in compensation to customers and investors.

Finally, in April 2016 opposition Labor leader Bill Shorten said: “Scandal after scandal, enough is enough. There needs to be a royal commission [into banking].”

The Liberal-National coalition voted down a Bill to bring about a royal commission 23 times, but eventually relented in December 2017 when some of its backbenchers threatened to cross the floor.

The commission heard shocking evidence of unethical behaviour. Dead people were charged fees on their accounts. An insurance policy was sold to a man with Down syndrome.

Vulnerable clients

Aggressive cold calling was often used to target vulnerable clients and sell them policies they did not need or that would have been difficult to claim on.

And now, with the final report of the royal commission, the chickens have come home to roost and banking in Australia will never be the same again.

Commissioner Kenneth Hayne’s report excoriated a sales culture that resulted in poor outcomes for clients. “Providing a service to customers was relegated to second place. Sales became all important,” he said.

“Rewarding misconduct is wrong. Yet incentive, bonus and commission schemes throughout the financial services industry have measured sales and profit, but not compliance with the law and proper standards.”

Criminal charges

Several institutions are likely to face criminal charges, while many others have been referred to the corporate regulator, the Australian Securities and Investments Commission, for further investigation.

The report recommends that commissions should be largely eliminated from the financial sector, including mortgage broking, financial planning and insurance sales.

Though it was made public on Monday, the final report was handed to the government on Friday in an excruciating ceremony where Hayne refused to shake the hand of the treasurer, Josh Frydenberg.

Responding to the report, Frydenberg said the government would take action on all of the commission’s 76 recommendations, “and in a number of important areas is going further”.

“My message to the financial sector is that misconduct must end and the interests of consumers must now come first,” he said. “From today, the sector must change, and change forever.”

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.