What are the banks saying?
The big four banks are starting to bite the bullet and release (very) initial responses to the final report.
The Commonwealth Bank has released a statement to the stock exchange, attributed to their CEO Matt Comyn:
“We note that the Commissioner has concluded that a number of matters regarding the Group’s conduct including in relation to superannuation warrant further investigation by relevant regulators and we will cooperate fully with these investigations…“We are implementing stronger policies and processes, including a new Code of Conduct.“There is still much work ahead to earn back trust but we are determined to restore broad respect and support for the important role that a major financial institution like CBA has to play in our economy and community.”
It’s worth noting that Matt Comyn will have to appear publicly on Wednesday to deliver CBA’s results, so no doubt will face more questions on the bank’s royal commission response.
Meanwhile, National Australia Bank’s statement is much more brief:
“NAB will now review the report, which contains 76 recommendations, and the Government’s response to fully understand the implications for the NAB Group. We will provide further updates as appropriate.”
Nothing as yet from Westpac and ANZ.
Labor accepts all recommendations ‘in principle’
Thanks Emily for the coverage this afternoon, I’m taking over from Parliament House, where I’m no longer locked up!We’ve heard from the Government, so what about the Opposition?Shadow Treasurer Chris Bowen has spoken in Melbourne, throwing Labor’s support behind all the royal commission’s recommendations “in principle”.He described it as a dark day for Australian banks and finance institutions and didn’t miss the opportunity to take a swipe at the Government — saying it was “the royal commission that Scott Morrison did not want you to see.”
ABC News✔@abcnews
Labor has committed to accepting, in principle, all 76 recommendations in Kenneth Hayne’s report #BankingRC
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12:11 PM – Feb 4, 201926 people are talking about thisTwitter Ads info and privacy(Updated: )
Handing over…
Now that she’s out from the lockup, I’m handing over the blog to my esteemed colleague and business reporter Steph Chalmers.Steph will take you through some areas of the report that we haven’t yet covered, as well as bring you further industry reaction.So stick around!!(Updated: )
Who’ll pick up the bill?
ABC business editor Ian Verrender says that, rather than a radical overhaul or massive restructure of the system, the royal commission has taken aim at exactly where it will hurt our major financiers.But he says that, in the end, it’ll be the customer that pays. Have a read of his analysis here:The banks start a new lobbying campaign today — but you, the customer, will pay
Here’s more analysis from Ian:ABC News✔@abcnews
Business editor @IanVerrender says the true success of the #BankingRC was in uncovering the extent of malfeasance, now estimated to be worth over $6 billion in restitution
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Worth mentioning…
So if Anna Bligh accepts responsibility, is her head on the chopping block?
-Rob
Interesting you say that, Rob, because it seems no one particular head is on the chopping block. Commissioner Hayne’s report referred several institutions to the corporate regulator for possible criminal charges, but did not name any individuals or companies that might face prosecution.(Updated: )
There’s been a bit of a mixed reaction from industry bodies
Industry Super Australia said the report appeared to stop short of systemic reforms to address conflicts of interest at the heart of most misconduct, instead opting for a series of changes to existing laws and stronger enforcement.Consumer group CHOICE called the report a “damning indictment of industry self-regulation” and signaled a “turning point for the industry and its lobby groups”.The Insurance Council of Australia supported recommendations relating to the general insurance industry, saying it had already started to address the recommendations surrounding add-on insurance and unfair contract terms. Overall, the ICA called the report “an opportunity for the financial services sector to start afresh”.Legal centre Financial Rights labelled the report a “solid blueprint” for reforming the sector, but said it was “disappointed” the report didn’t go far enough, improving remedies for breaches of responsible lending law and banning junk products.(Updated: )
Anna Bligh is speaking now
For the uninitiated, Ms Bligh is the CEO of the Australian Banking Association.Ms Bligh has accepted full responsibility for the banks’ failings, saying they must now change to make sure this never happens again. She said today’s report contained some “very tough medicine” for the banks, including potential court cases.With 76 recommendations, it represents a huge overhaul and top-to-bottom reform of banking and finance in this country.It will make changes to what financial services and products can be offered, how staff are paid, what sort of penalties there’ll be for wrongdoing.There’ll be new offences for a range of activities and, importantly, new rights for customers.But Ms Bligh said the ABA doesn’t necessarily back all of the recommendations, such as the “radical” changes to mortgage-broking payments.ABC News✔@abcnews
Australian Banking Association on #BankingRC recommendations: “There is some very radical suggestions here that need some very careful thinking before they are rushed into”
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Mr Frydenberg dodged questions over whether he should apologise for the Government’s long-held opposition to holding this royal commission.His response?It’s actually the Government that’s been delivering better consumer outcomes for Australians with reforms that we’ve been making.Let me be very clear — the Government is now acting on all 76 recommendations, and we are going further in some respects.ABC News✔@abcnews
Reporter: Were you wrong to oppose [the royal commission] for so long?@JoshFrydenberg: We can debate for hours Labor’s failures when they were in office…
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The report brings bad news for mortgage brokers
Some of the mortgage broking industry’s worst fears are contained in the final report, with the commission recommending the industry move from a commission-based to fee-based model. And Commissioner Hayne says home loan customers should foot the bill for the fee — not the banks.At the moment, brokers receive upfront and trailing commissions from banks and other lenders, meaning the broker is incentivised to secure the customer a loan — and the size of the commission on offer can influence the broker’s selection of the lender and the size and type of the loans. Commissioner Hayne recommends a “steady but deliberate” move from the existing model to a model where a borrower pays a fee instead.The Government says it will ban trail commissions and other “inappropriate forms of lender-paid commissions” on new loans from July 2020, and will conduct a review in three years to consider the implications of removing upfront commissions and moving to the borrower-pays model.The report also recommends clearing up the question of who the mortgage broker is acting on behalf of.While brokers currently receive commissions from banks and other lenders, the commission heard evidence that the reality is, customers believe the broker is looking out for their best interests.Commissioner Hayne recommends enshrining this in law through a “best interest duty” — breaching this obligation could lead to the broker being hit with a civil penalty.(Updated: )
Your questions, answered
“What if I want to buy a house?”“What if I have a mental illness”“What if I own a farm?”“What if I’ve been a victim of dodgy practices?”Here are the answers to some of the questions you might be asking.How will the banking Royal Commission affect me?
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There’s going to be some changes to superannuation
The Treasurer says the Government will ensure fund members only have one account. Mr Frydenberg says the Government will prohibit the deduction of advice fees from MySuper accounts.
ASIC will also become the primary conduct regulator overseeing superannuation. It and APRA will receive extra power by creating civil penalties for breaches of laws governing superannuation trustees and directors.
The Commission has also recommended the banking executive accountability regime (BEAR), which governs who is responsible when issues arise, should be applied to the superannuation sector.
ABC News✔@abcnews
Treasurer @JoshFrydenberg outlines Government’s proposed reforms to the superannuation system in response to #BankingRC
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11:25 AM – Feb 4, 201926 people are talking about thisTwitter Ads info and privacy(Updated: )
The treasurer says the Government is taking action on all 74 of Commissioner Kenneth Hayne’s recommendations.Here are Commissioner Hayne’s four key observations:- In almost every case, the conduct was driven not only by the relevant entity’s pursuit of profit, but also by individuals’ pursuit of personal gain
- Entities and individuals acted in the ways they did because they could – power was taken away from consumers because they had little information to be able to negotiate terms
- Consumers often dealt with financial entities through intermediaries – in many cases, consumers may have thought the intermediaries were acting on their behalf, but often they were being paid by the financial institutions – therefore, a clear conflict
- Financial services entities that broke the law often weren’t properly held to account
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Treasurer Josh Frydenberg is speaking now
“From today, the banking sector must change and change forever.“My message to the financial sector today is that this misconduct must end. And you must put the interests of consumers first. Consumers must be treated honestly and fairly.“My message to the Australian community today is that your government is committed to making this happen.”ABC News✔@abcnews
“From today, the banking sector must change and change forever.” Treasurer @JoshFrydenberg responds to the #BankingRC recommendations
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11:17 AM – Feb 4, 201963 people are talking about thisTwitter Ads info and privacy(Updated: )
Recommendations broken down by sector
With 76 recommendations made in total, here’s the breakdown of the areas where those were made- Banking – 17 recommendations
- Financial Advice – 10 recommendations
- Superannuation – 9 recommendations
- Insurance – 15 recommendations
- Culture, Governance and Remuneration – 7 recommendations
- Regulators – 14 recommendations
- Other important steps – 4 recommendations
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ABC political editor Andrew Probyn says it’s a ‘cautious’ report
Here’s Andrew:ABC News✔@abcnews
Royal Commission recommends 24 individual institutions be referred to either APRA or ASIC for civil or criminal offences #BankingRC
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11:07 AM – Feb 4, 201971 people are talking about thisTwitter Ads info and privacyIt’s cautious and in some ways common sense. If you’re looking for blood and guts, there’s no great deal of blood and guts.There’s no specific referrals of executives. There’s 22 referrals in the document, there’s 24 in response to the royal commission. These are 22 individual entities to be referred to APRA or ASIC for civil or criminal offences.The big banks, everyone but Westpac is named. Either directly or through subsidiaries or companies associated with it.But Kenneth Hayne has savaged the culture of the banking sector. He said it was driven by profit and gain, rather than the best for the consumer.(Updated: )
What’s the upshot of the report?
It has recommended a complete overhaul of the sales culture and conflicts of interest rife in the financial services sector.It makes 76 recommendations, which, if implemented, will lead to massive disruption of the business models of several industries, including mortgage broking and financial planning.Commissioner Kenneth Hayne referred potential criminal breaches by several banks, superannuation trustees and insurers to the corporate regulator ASIC but did not name names of those who may end up being charged.Treasurer Josh Frydenberg says the Government is “taking action” on all of the recommendations. He’ll be speaking from Parliament House soon.(Updated: )
Our business reporters are out of the lockup
Our biz reporter Michael Janda says the banking royal commission report takes the axe to sales culture in finance.Here’s Michael:Commissioner Kenneth Hayne’s final report, and the government’s support for all 76 recommendations, leaves some parts of the financial sector at risk of being effectively legislated out of existence.Mr Hayne’s report was scathing of a sales culture that resulted in poor customer outcomes, and recommended dramatic changes to the payment of mortgage brokers and financial planners that would see many leave the industry, as well as a major overhaul of insurance sales practices, especially for funeral cover.The commissioner has also referred several institutions to the corporate regulator for possible criminal charges around the fees for no service scandal, but declined to name names of individuals or companies that might face prosecution.(Updated: )
I think you’re in good company on this one, Pete.I do hope this will clears the deck and get on with proper business practice, and pay back what is intended to clients
-Pete Dene
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So how are the banks feeling right now?
Pretty nervous I’d say.However, despite the potentially damning outcomes for the banking industry, ANZ CEO Shayne Elliott was out and about in Melbourne today looking for some good publicity.Mr Elliott was selling The Big Issue magazine in front of the bank’s head office where (unsurprisingly) more media than customers approached him.But he refused to answer questions about the banking royal commission — instead hoping customers and shareholders would be ‘interested’ that he was out selling the magazine.That’s Shayne Elliott in the hi-vis selling The Big Issue magazines At the commission hearings Mr Elliott admitted ANZ focused too much on revenue. It was grilled over its bank tellers selling super products, despite not being qualified to do so.He took a 23 per cent pay cut last year — mainly due to reputational damage that had emerged from the royal commission.(Updated: )
There’s been a lot of coverage on this royal commission in the past year. So much so that you could be forgiven for not reading every single update.But today is D-day so, before the report is revealed, let’s get you up to speed.First let’s start with how the royal commission came to be. It’s a long story, but at the heart of it is the banking industry’s promotion of an aggressive, sales-driven culture, which emphasises profit at all costs. You can read more about that here:Why are we having a royal commission into the banks? Catch up here
Then, once the hearings commenced, some shocking practices within the industry were uncovered, like charging fees where no service was provided, taking money from dead customers, increasing credit limits for problem gamblers, pushing families to homelessness. You can read more about those here:The banking royal commission’s greatest shocks (so far)
When hearings wrapped up at the end of last year, Steph Chalmers took a look at what the report might recommend. She predicted there would be recommendations about responsible lending, financial adviser and mortgage broker commissions, regulator shake-up and criminal and civil charges. Here’s her piece where she also details what each recommendation could mean for you:What the final banking royal commission report is likely to say — and what it could mean for you
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Good afternoon
Welcome to our live blog of the banking royal commission’s final report. Here’s what’s what for this afternoon’s coverage.My name is Emily and I’ll be helping to bring you up to speed with this royal commission. I’ll give a bit of a refresher on how we got here and what we can expect.We’ll also be seeing Treasurer Josh Frydenberg’s address from Parliament House at about 4:20pm AEDT (for those not on the east coast, that’ll be in about 20 minutes).After that, I’ll be handing over the blog to business reporter Stephanie Chalmers, who is currently in the lockup and who has been committedly covering the royal commission hearings for months now.Once Steph emerges, also about 4:20pm, she’ll take over the reins to take you through what the report will mean for Australia’s financial sector, and bring you reaction from key stakeholders.
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