Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry: Final Report Released

5 February 2019

The long-awaited Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has been released, featuring a total of 76 recommendations. Royal Commissioner the Hon Kenneth Hayne AC QC delivered the Final Report to the Government on Friday before it was tabled in Parliament on Monday afternoon after the Australian stock market closed.

Treasurer Josh Frydenberg summarised the Final Report as a “scathing assessment of conduct driven by greed and behaviour that was in breach of existing law and that fell well below community expectations”. He called on the financial sector to ensure an end to misconduct, while confirming the Government’s focus is on “restoring trust in our financial system and delivering improved outcomes for consumers”. While the Treasurer said the Government would “take action” on each of the 76 recommendations, he stopped short of committing to implement all of the recommendations in full.

The recommendations of the Final Report are wide ranging and affect every aspect of financial services. The mortgage broking industry faces increased regulation, the end of trail commissions and at least some limitation to upfront commissions, with Commissioner Hayne recommending an end scenario in which the borrower rather than the lender pays a broker. The Treasurer deferred the proposal for a borrower-paid model, calling for a review in three years’ time.

Agribusiness lending is also set for major changes with a new scheme proposed for agricultural borrowers dealing with financial hardship. Commissioner Hayne has singled out industry codes as a key area for reform, calling for ASIC-approved industry codes for the life and general insurance and banking industries to include enforceable provisions, contraventions of which would be considered breaches of the law.

After a number of controversies in the financial advice sector, Commissioner Hayne has called for a new disciplinary regime for financial advisers and a requirement for annual disclosure and renewal of ongoing advice agreements.

Superannuation was a key area of focus for the Royal Commission, with the Commissioner singling out the role of trustees, who he proposes should no longer be able to serve in other capacities in superannuation, making their role truly independent. The Commission has also echoed some of the recommendations from the earlier Productivity Commission report by calling for a simplification of the default superannuation system, with each worker only having a single default account.

The Commissioner also called for changes to the culture of institutions by requiring regular review of internal culture, as well as increasing APRA’s responsibilities to manage misconduct, compliance and non-financial risks and regular reviews of front line staff remuneration.

In its response to the Final Report, the Government has agreed to implement those recommendations that are within its power and supports a number of other recommendations that apply to third parties and regulators. The Government has also highlighted additional actions it will take, as well as its previous policy changes to attempt to address concerns.

The Treasurer announced the Government will extend the jurisdiction of the Federal Court to cover corporate criminal misconduct to expedite cases to be pursued by the regulators. Treasurer Frydenberg also committed to establish an industry-funded compensation scheme of last resort for those harmed by financial services misconduct, with some 300 consumers to receive up to $30 million in compensation. The Treasurer also confirmed that more than 20 matters had been referred to ASIC for potential further regulatory action, while refusing to comment on specifics.

The Labor Opposition said it was a “dark day for Australian banking”, while describing the Final Report as a “blueprint” for reform of the financial sector. The Opposition provided “in principle” support for all recommendations, while confirming it will give “full and proper consideration to all the findings and recommendations” in due course.


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