Written by Blair Campbell, Senior Associate, Commercial Litigation
The eagerly anticipated final report of the Banking Royal Commission was finally released on Monday 4th February 2019, with the Treasurer providing the Government’s response to Commissioner Hayne’s 76 recommendations castigating the industry, and holding out the promise of substantive reform.
Headed by the Honorable Kenneth Hayne (former Justice of the High Court), the Royal Commission has received numerous reports of serious abuses in Australia’s financial sector, including by some of Australia’s largest financial institutions.
The litany of misconduct shocked many Australians, as customers recounted examples of bank abuses including:
- Customers being charged fees unrelated to any service, and continuing to be charged after customers had died,
- Financial products being pushed onto customers without regard to their circumstances, or even wishes, including to people with intellectual disabilities, and
- Misleading regulators.
Over 10,000 submissions were received by the Royal Commission, with the bulk relating to personal finances and superannuation.
One key issue that arose was a pervasive cultural failing in the banks, with profit-motive overriding concerns about legal compliance. This was especially marked when banks sold other financial products like financial planning, insurance, and superannuation products to clients.
In anticipation of the likely outcome of the Royal Commission, several large banks have divested themselves of their financial planning and advisory arms. In addition, banks have tightened their lending criteria, producing a marked credit squeeze. This, in turn, has added pressure to Australia’s troubled real estate market.
The measures set out in the report, and the Government’s responses to them, are likely to send shock-waves through the financial services sector for years to come. The promised changes will take some time to be fully implemented, but hold potential to be transformative as borrowers are given more rights and the financial sector held to account for the excesses of the past.
This is the second article in a two part series. You can read the first part here