5th Feb 2019
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How the royal commission proposes to fix the banking mess
Author: Ben Hocking
Royal commission recommendations

The royal commission report into the financial service industry was scathing of banks and financial institutions.

Commissioner Kenneth Hayne slammed the banks for being driven by greed and also accused the regulators of being too soft while dealing with these institutions when they were caught breaking the law.

The report made 76 recommendations to clean up the sector and the government’s response supports all of them in part or whole.

Treasurer Josh Frydenberg yesterday said: “the banking sector must change and change forever”.

Here are some of the most important recommendations of the report and what it means for retirees.

Banking

  • Justice Hayne has referred a long list of companies (including ANZ, NAB, CommInsure, AMP and Suncorp) for possible criminal or civil action.
  • Require mortgage brokers to act in the best interests of the intending borrower, not the bank providing the loan.
  • Borrowers rather than lenders should pay the mortgage broker for their services.

Superannuation

  • A ban on advice fees that are deducted from MySuper accounts
  • Advice fees for accounts other than MySuper accounts to be prohibited in most cases
  • Heavy-handed selling of superannuation to be abolished.

Financial advice

  • The creation of a new disciplinary framework for financial advisers
  • All financial advisers to be registered
  • The annulment of grandfathered provisions of conflicted remuneration
  • The current cap on commissions for life-risk insurance should be reduced to zero
  • Banking licence holders to be required to report ‘serious compliance concerns’ about financial advisers to ASIC on a quarterly basis.

Insurance

  • Ban on heavy-handed selling of insurance products
  • Funeral expense insurance to be treated as a financial product so that it receives proper oversight
  • A cap on commissions paid to car dealers for add-on insurance products
  • Handling and settlement of insurance claims to be defined as a financial service so that it receives more oversight.

Regulators

  • ASIC and APRA to be overseen by a new independent authority (a watchdog for the watchdogs)
  • ASIC to overhaul its approach to enforcement with a focus on court action rather than infringement notices and enforceable undertakings.

What did you think of the royal commission’s findings? Did it go far enough? What action would you have liked to see?

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    COMMENTS

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    5th Feb 2019
    11:08am
    Outstanding report and excellent recommendations.
    Now we can put this whole episode to bed and move forward
    Arvo
    5th Feb 2019
    12:08pm
    Not so fast Lothario, possible criminal conduct by banking and financial services industry must not go unscathed . We'll move on after that occurs!
    Adrianus
    5th Feb 2019
    3:12pm
    Arvo, you will be waiting a long time to move on. Nobody is going to gaol. Or jail.
    Rae
    5th Feb 2019
    3:49pm
    Yes. We know we can't trust them now. I had a manager blatantly lie to me and I didn't trust them but now it's official. You can't trust the banks.
    Adrianus
    5th Feb 2019
    5:16pm
    But you can trust the Labor Party.
    MICK
    5th Feb 2019
    10:54pm
    Why does your comment not surprise me Lothario. The crooks are rejoicing at the 'do nothing' report handed down where the CEO criminals have no case to answer. The fact that bank shares, mine included, went up significantly today says it all.
    The Royal Commission was an opportunity to fix the banking system but it is no more than a slap on the wrist. Just like America in the wake of the GFC it will be business as usual and the bonuses for the crooks in suits will start flowing again after a year of (pretend) sorrow. The fact that banks contribute to political parties also means that politicians will simply look the other way again. APRA and ASIC? These are failed regulators who you would not trust to make you a cup of coffee. No prosecutions will happen.

    In the end a perverse system has found in favour of the crooks who will laugh at society because they did the crime but will not be required to pay compensation from their own fortunes and will not serve years in prison. If you or I embezzled money we would be required to do both.
    Adrianus
    5th Feb 2019
    11:14am
    Well I don't think anyone should go to gaol. Especially not Ken Henry. As many posters have continually reminded us, he and Kevin Rudd saved us from the GFC.
    Arvo
    5th Feb 2019
    12:14pm
    You might not Adrianus but over few million bank and financial industry customers do think that many of the directors and chairman of those institutions MUST go to gaol !
    Adrianus
    5th Feb 2019
    3:10pm
    How would you like to be a whistleblower under a Shorten government? You would get 30% of the class action judgement just for squealing on your workmates. A trick he learned from the Chinese Communist Party no doubt.
    Rae
    5th Feb 2019
    3:52pm
    Arvo best revenge would be for customers to just walk away. There are honest not for profit banks out there who don't have shareholders demanding more and more and more dividends.
    Arvo
    5th Feb 2019
    4:08pm
    Adrianus-if workmates are part of the problem (1) they are not "mates" and (2) they deserve to be squealed against
    Robbo
    5th Feb 2019
    4:46pm
    How did Shorten get his job Adrianus well he backed stabbed his bosses he knows all about it.
    Adrianus
    5th Feb 2019
    5:07pm
    Interesting? So its a union culture?
    pedro the swift
    5th Feb 2019
    12:18pm
    Ho hum. Much ado about doing nothing. Nothing will change. Banks and other "financial" institutions will carry on as usual.
    And now they want Another "watchdog". Just more useless "mates" employed by " mates" to look after "mates".
    No one will go to jail or be suitably punished for any crimes. Any action will drag on for years till its forgotten and then quietly dropped. Can't have our "mates" being punished for making millions from the peasants can we? How are the pollies going to get good jobs once they retire if they don't look after their "mates" in business?
    MjP
    5th Feb 2019
    2:03pm
    Spot on Pedro the swift, nothing will change because if politicians do anything to punish their mates they won’t get cushy jobs when the leave politics.
    DogLover
    5th Feb 2019
    2:30pm
    Nothing will change and no one will be charged. The Royal Commission was not given enough time and resources to completely investigate all the extremely bad and illegal practices by all banks. The politicians don't care if "ordinary" people suffer at the hands of greedy bankers.
    Not a Bludger
    5th Feb 2019
    2:31pm
    The definition of “Most Important” findings is certainly in the eye of the beholder who penned this “summary”.
    Entirely unmentioned are two very important recommendations relating to superannuation, viz:-
    - an employee can only be put into one default fund in his/her lifetime
    - a trustee of a fund can only be a trustee ie not hold multiple roles
    These will stop union thug bosses
    - forcing employees join the industry fund of the union’s nomination (or no job)
    - being the trustee of a union controlled industry fund (and drawing a mozza in directors fees) whilst holding other roles
    Let us see if Shorten, the ACTU, the ALP and Industry Funds support the RC on these.
    Adrianus
    5th Feb 2019
    3:16pm
    This is one of the reasons Shorten, Bowen and other unionists did not want the banking RC.
    cupoftea
    5th Feb 2019
    8:41pm
    NAB Ithink you should learn about union trustees,and about the industry super because whe can always trust the employers ask the banks etc
    Dragrush
    5th Feb 2019
    3:28pm
    Another Royal commission finished at grest cost to the taxpayer but it has done nothing for us really. I will bet that noone will get jail time and it is a disgrace that the too high credit card interest never was addressed. How can they justify charging 15% when the official rate is still 1.5%. Time to have the Chinese rin ourbanks!!!!
    Adrianus
    5th Feb 2019
    5:11pm
    Bill Shorten said today that it was of political importance in the upcoming election. So someone must be benefiting from the Banking RC?
    Chris B T
    5th Feb 2019
    3:53pm
    The one thing that didn't see the light of day was fraudulent accounts open by scammers.
    Not taking any responsibility who opened accounts and there use.
    Then quote privacy issues when you try contact them or bank about the scammer.
    GeorgeM
    5th Feb 2019
    8:10pm
    The article summarises the Report has "..slammed the banks for being driven by greed and also accused the regulators of being too soft while dealing with these institutions..", yet the final Recommendations are light on these two main areas regarding strong action needed. Even this article, as also much of the media, has ignored an important part of the report regarding "..prudential supervision of remuneration systems..", where it also asks APRA to set new guidelines for remuneration.

    As I mentioned even before the report came out:
    ASIC and APRA need to be fully restructured, and a new structure with powers (and reporting on it's use or not) strong enough to take direct action.

    Regarding the greed and avarice of people on million-dollar bonuses, it is time for Govts to take the hard road - Stop the Greed Factor! How? Limit maximum CEO Salary to $1 Million (even Gerry Harvey said no more was needed). Any Bonus should be max 20% and based on KPIs to be including at least 50% for Customer Satisfaction based on Independent surveys not by the Bank.

    Neither of the above 2 key actions have been adequately addressed.
    Hairy
    5th Feb 2019
    8:47pm
    Spot on Pedro the swift.just another round of academic f...wits wasting tax payers money for absolutely nothing.
    MICK
    5th Feb 2019
    10:59pm
    I see that most of the posters today are trolls backing the crooked banks and the crooked system which allows dirty business to be done.
    I also note that we have some posters crowing about the waste of money whilst not acknowledging that the waste is the result of the corrupt system and their CEOs who will not be required to serve lengthy jail sentences for their crimes. Make no mistake, the behaviour of the bank CEOs is a crime and that has at the least been acknowledged.

    The dirty top end have again won thanks to the 'club' making sure they were protected. We live in a sick society!
    Adrianus
    6th Feb 2019
    9:44am
    MICK, if crimes have been committed then there will be charges. But ask yourself why there are so many Labor members in these influential positions? Then ask yourself why Shorten and Bowen did not originally want the Banking RC? Just saying, your line in the sand is washed away with the tide every day.


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