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Banking royal commission to deliver interim report – live
'Greed has been the motive': banking royal commission interim report delivered – live
(35 minutes later)
A quick look at the ASX200 shows us it is actually UP since the report was released - the big banks have seen their shares increase.
Anna Bligh is now delivering her response. The former Labor Queensland premier faced some heat before stepping in as the banking sector’s spokeswoman – and it wasn’t that long into the job before she found herself defending the banks as they faced what was, by then, an inevitable royal commission into their actions:
It is fluctuating a little - but it is up about 25 points.
Our banks have failed in many ways. Failed customers, failed to obey the law and failed to meet community standards.
In his press conference, Josh Frydenberg did not rule out more legislation in response to this interim report.
And all of these failures are totally unacceptable.
Kenneth Hayne had some suggestions to use as a guide:
Too many customers have been hurt and it has to stop. Too many customers - customers want to see a much better deal from their banks.
The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’.
Australians have every right to expect the world’s best banks. It is clear today that as an industry we have failed to deliver that.
Much more often than not, the conduct now condemned was contrary to law. Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain?
Make no mistake, today is a day of shame for Australia’s banks. Having lost the trust of the Australian people, we must now do whatever it takes to earn that trust back. Banks accept full responsibility for their failures and right now in every bank people are working day and night to make things right for their customers. To move from a selling culture to a service culture, there is much more work to be done in every bank.
Should the existing law be administered or enforced differently? Is different enforcement what is needed to have entities apply basic standards of fairness and honesty: by obeying the law; not misleading or deceiving; acting fairly; providing services that are fit for purpose; delivering services with reasonable care and skill; and, when acting for another, acting in the best interests of that other? The basic ideas are very simple. Should the law be simplified to reflect those ideas better”
But every bank is determined to find the problems, to fix them and to payback every penny.
He again says what the government has previously promised - that if the commissioner, Kenneth Hayne, asks for an extension, the government would look at granting one.
All Australians need strong and stable banks, but more importantly every Australian deserves a fair and trustworthy bank.
Josh Frydenberg finishes his press conference with a promise to take the interim findings seriously:
This report is the first step to building the banks that Australians deserve. All banks will now take the time to examine the report in detail and do all that must be done to make things right.
Can I just say the behaviour that we have seen to date has been unacceptable. Fees charged to dead people, fees for no service, 300,000 plus breaches for providing insurance and advice that was unsolicited and against the rules.
The banks will in time be making a submission that addresses the questions in the report and providing that as requested to the royal commission.”
[There are] many other examples of conduct which is unacceptable. But now that it has been revealed, now that we have the interim report into next year, the final report, it is incumbent upon those in the financial services sector and those regulators who are charged with enforcing the law lift their game because the public deserve it and the public expected”
The major banks have seen between a 1.6% jump in share price - for AMP to 3.0% for NAB since the interim report was made public.
Commissioner Hayne’s assessment of what had occurred in Australia’s financial industry in recent years is scathing.It should be reprinted as the first page of every economics and finance textbook in Australia’s universities.
ACTU head Sally McManus has given her take on the interim report:
Here is Hayne’s summation, found in the executive summary:
The treasurer has admitted that banks have put profit before customers. He, and his government, should act to get banks out of super and protect the retirement incomes of working people.
“Why did it happen?”
We need to get the banks out of super. Industry funds are non-profit, run for members, and produce better returns. There is no upside to the banks for anyone other than their shareholders.
“Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty.
The banking sector needs urgent reform to ensure that customers and workers are treated properly and that the actions revealed by this commission are not allowed to continue.
“How else is charging continuing advice fees to the dead to be explained? But it is necessary then to go behind the particular events and ask how and why they came about.”
We are now waiting on the Australian Banking Association’s Anna Bligh’s response.
Banks, and all financial services entities recognised that they sold services and products.
(As to where is Bill Shorten?)
Selling became their focus of attention. Too often it became the sole focus of attention.
Tanya Plibersek:
Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’.
I think he’s been a dad looking after his kids during the school holidays, actually. He’s allowed to have a week of leave. He’s a normal person with family responsibilities and I’m not really sure whether – you know, what the implication is. He’s allowed to have leave and he’s particularly allowed to be a dad every time and again. We know the toll that politics takes on family life. Good on him, good on him for actually being around.
“From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales. When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done.
Now, we have heard this argument put forward quite a bit: that the royal commission could have the unintended consequence of making the banks “too cautious” and inadvertently hurting families and businesses by not giving loans where they usually would.
“The conduct regulator, Asic, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, Apra, never went to court. Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with Asic of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that Asic had reasonable ‘concerns’ about the entity’s conduct.
To that, Tanya Plibersek says:
“Infringement notices imposed penalties that were immaterial for the large banks.
I think this is the response that gets trotted out every time there is a demand for the sector to behave according to the law. Parts of the banking or financial services sector say, ‘Well, if we’re forced to behave according to the law, then credit will dry up for individuals and businesses.’
Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that Asic could properly have asked a court to impose.”
I don’t think that is a legitimate complaint or a legitimate concern. The very least we should expect is for the sector, as a whole, to abide by existing laws and to perhaps go a bit beyond that and put the interests of their consumers at the centre of their decision making.
Frydenberg says the government has released the report as soon as it has been able – within a matter of hours of the governor general receiving it – and that is a mark of how serious the government is taking it.
I think it’s a false and very convenient claim for them to make that if they’re forced to do the right thing then credit will dry up. We’ve heard it before. I don’t credit it.
The question that needs to be asked is how did this culture of greed and selling as the dominant focus, how was that allow to permeate the sector to produce adverse outcomes for consumers without being stamped out earlier and without the penalties that exist to be properly enforced.”
.@tanya_plibersek: Labor is calling for the banking royal commission to be extended to hear the testimony of more victims. MORE: https://t.co/4Zn0rN80nM #SkyLiveNow pic.twitter.com/bFGXlYy57Y
But having had the report since this morning, Josh Frydenberg is really taken with the culture of “greed”.
The acting Labor leader again points out that she has only just received the report, which, at about 1,000 pages, is not exactly easy reading.
The two key takeouts for me have been, and let’s be clear, this is a 1000-page report, three volumes, and I want to commend the commissioner and his team on the thoroughness of this report – but the greed that has permeated the culture, the compliance of the sector and secondly, the misconduct has gone to a large degree unpunished. Effectively unpunished.”
But Tanya Plibersek’s takeaways are similar to Josh Frydenberg’s conclusions:
Josh Frydenberg said one of the take aways from the report is the regulator – Asic – may have been too close to the sector it was meant to be policing and the government had taken steps to address that:
I think the commissioner is pointing to two major issues here. The first major issue is that you’ve got a whole sector driven by greed without due regard to the needs of consumers in the sector. The second major problem is that both Apra and Asic appear not to have acted on reports in a way that would protect consumers as a class from this bad behaviour.
I think it was a strategy which saw the regulator working too closely with the sector that they were regulating. We have increased the resources by more than $70m to Asic and as you know we have put in place Daniel Crennan QC to be an effective enforcer of compliance. But what this report does go to with Asic is a culture among the regulators which did not produce the best possible outcomes for consumers. I do point out that we have a new head of Asic in James Shipton and he has already undertaken a review, led by Daniel Crennan to work out what is the best strategy around enforcement and compliance.”
I think both of those issues need to be taken up by future reforms, to make sure that customers’ interests are protected and to make sure that when systemic poor behaviour is uncovered, like we’ve seen, that actually the regulators take proper action to fix it.
The banks, through their representative, Anna Bligh, will respond at 3.15pm.
Tanya Plibersek uses the opportunity to announce Labor’s reaction to the royal commission’s final report, when it is handed down (at this stage) in early February:
Josh Frydenberg acknowledges that Australia’s financial system did manage to get it through the global financial crisis in a way the American – and indeed most of the world’s – systems did not.
If elected, a Shorten Labor government will establish a financial services royal commission implementation taskforce to reform the culture of profit-over-people in the financial services sector. The taskforce will be located within Treasury and work closely with the attorney general’s department and will oversee implementation of reforms recommended by the final report of the royal commission to ensure that they are delivered swiftly and effectively.
But he says that is not a leave pass for Australia’s financial sector behave how they wish:
The taskforce, of course, will work closely with victims and their advocates in recognition that the lived experience of the systemic misconduct in the banking sector should inform the response.
Australians expect their superannuation services, their insurance services, their banking services, their financial advice to be delivered in a way that puts their interest first. That the consumer comes first, second and third In fact, these financial entities have an obligation under their licence to act honestly, fairly.”
Under a Shorten Labor government, Chris Bowen as treasurer will report to the parliament every six months on progress in implementation until the recommendations of the royal commission are fully implemented.
Josh Frydenberg does not hold back – and does not rule out new legislation:
Plibersek again calls for the royal commission to be extended:
Finally, the commissioner asked the question, “What can be done to prevent the conduct happening again?”
More than 9,000 submissions have been received by the royal commission, but so far only 27 customers have had the chance to tell their stories publicly.
In doing so, he makes the telling observation that much more often than not, the conduct now condemned was contrary to the law.
Given this damning interim report, we believe that there is a strong case to consider extending the banking royal commission in order to hear from more victims in more places, in more parts of Australia.
This does raise the question, whether new laws are required, or whether existing laws simply need to be better in force. He also asked the question: ‘Should the existing law be simplified?
Scott Morrison wanted to keep this shocking misconduct by the banks secret from the Australian public. This is the report that Scott Morrison never wanted. If it had been left up to Scott Morrison, banks would still be behaving this way.
Rather than adding an extra layer of legal complexity to an already complex regulatory regime. This interim report is a frank and scathing assessment of the culture, conduct and compliance of our financial system. Australians expect and deserve better.”
If it were up to him, the horrific stories would never have been told and the conduct would have continued. The Liberals have spent five years fighting for the top end of town.
Josh Frydenberg:
They delayed acting on the royal commission for 600 days. They voted against it 26 times. We know whose side they are really on. The Liberals can’t be trusted to act on these findings and to clean up the finance industry. They have always been, and always will be, on the side of the big banks.”
The interim report delivered today to the governor general shines a very bright light on the poor behaviour of our financial sector.
Expect to hear this quite a bit as we get closer to the election – Labor points out that the Coalition did not want the royal commission – and Tanya Plibersek again uses some of Scott Morrison’s own previous words against him:|
Banks and other financial institutions have put profits before people.
It was about 2.5 years ago, in April 2016, that Labor called for this royal commission to be established.
I repeat that.
The Liberals fought tooth and nail against the establishment of the royal commission for more than 600 days. They wanted to protect the banks. In fact, they wanted to give the banks a $17 billion tax cut. Scott Morrison voted against this royal commission 26 times. Scott Morrison called it, and I quote, ‘A reckless distraction’, and I quote ‘A QC’s complaints desk, a populist whinge’.
Banks and other financial institutions have put profits before people. Greed has been the motive … as short-term profits have been pursued at the expense of basic standards of honesty.
The Liberals have never taken this seriously. They were dragged kicking and screaming into holding a royal commission and they gave it an unreasonably short time frame.”
Too often, simply selling products and services have become the sole focus of attention.
Tanya Plibersek says Labor has only just received the report, but her first impressions are:
The culture and the conduct of the banks was, in the words of the commissioner: “Driven by an reflected in their remuneration practices and policies.”
“Too often, as the interim report says, behaviour [was] driven by greed.
This was coupled with deficiencies in governance and risk management. As a result, almost every piece of conduct identified and criticised in this report can be connected directly to some monetary benefit from engaging in conduct.
“The pursuit of short-term profit at the expense of basic standards of honesty is an indictment of the behaviour we have seen.
In the end, rules, systems, processes and practices are necessary, but having the right culture and performance depends, in the commissioner’s words: “Upon people applying the right standards and doing their job properly.”
“If it was up to the Liberals the banks would still be behaving this way.
This interim report also makes clear that, while behaviour was poor, misconduct when revealed: “Either went unpunished or the consequences did not meet the seriousness of what has been done.”
The interim report says, ‘When misconduct was revealed it either went unpunished or the consequences did not meet the seriousness of what had been done. The regulator, Asic, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, Apra, never went to court.’
The commissioner makes a series of significant observations with respect to the effectiveness and the ability of regulators to detect, monitor and enforce compliance with the law.
“So, of course, Labor welcomes this interim report of the financial services royal commission.
Asic, the commissioner points out, rarely went to court to seek public annunciation of and punishment for misconduct. Indeed, in his words: “Little happened beyond an apology from the entity, drawnout remediation, and an infringement notice or an enforceable undertaking that acknowledged no more than ASIC had reasonable concerns about the entity’s conduct.”
“We thank the commissioner and counsels assisting and all of the staff of the royal commission for the work that they’ve done to date.
Significantly, the commissioner observed infringement notices, impose penalties that were immaterial to the large banks. Again, in his words: “Too often, entities have been treated in ways that would allow them to think that they, not ASIC, not the parliament, not the courts, will decide when and how the law will be obeyed or the consequence of the breach remedied.”
“Most importantly, we thank the brave Australians who have come forward to tell their stories.
The whole interim report can be found here.
“Australians have been appalled by conduct in the financial sector that has been exposed by this royal commission.
The Treasurer reiterates what the commissioner, Kenneth Hayne, said when starting the commission – that it is not the role of the commission to decide remedies:
“Conduct such as charging fees to dead customers, lying to regulators, shonky advice that has robbed Australians of their life savings, approving loans that customers could not possibly afford to repay, forcing farmers off the land and out of their homes, pressuring vulnerable Australians to buy insurance over the phone.”
The commissioner does not determine disputes, award damages or other relief, or decide whether there has been misconduct. They are roles for a court.”
.@JoshFrydenberg on the interim report into misconduct by the banking and financial sector: we will take the action necessary to restore the public's trust in our financial system. MORE: https://t.co/v1dbyZrheY #SkyLiveNow pic.twitter.com/At8atZulwq
Josh Frydenberg has just started his press conference
Acting opposition leader, Tanya Plibersek, will also respond to the report’s findings shortly.
Further on from Gareth Hutchen’s post, the interim report will focus on these main issues:
Back to Hayne’s report.
consumer credit
After his scathing assessment of the behaviour of Australia’s major banks and regulators, he asks what needs to be done.
financial advise
He makes a point of noting how the banks have been scrambling, as the royal commission has unfolded, to get ahead of the political and regulatory game. Their behaviour hasn’t impressed him.
small and medium (SMEs) lending
As the Commission’s work has gone on, entities and regulators have increasingly sought to anticipate what will come out, or respond to what has been revealed, with a range of announcements. These include announcements about new programs for refunds to and remediation for consumers affected by the entity’s conduct, about the abandonment of products or practices, about the sale of whole divisions of the business, about new and more intense regulatory focus on particular activities, and even about the institution of enforcement proceedings of a kind seldom previously brought. There have been changes in industry structure and industry remuneration. “...This interim report seeks to identify, and gather together in Chapter 10, the questions that have come out of the commission’s work so far. There will be a further round of public hearings to consider these and other questions that must be dealt with in the commission’s final report.”
regional and remote banking
Of the six hearings held so far, these four showed, quite starkly, just what the commission was going to be dealing with.
The next round of hearings, due to start in November, will focus more on policy, where the government says it has already made some headway.
Treasurer Josh Frydenberg is due to hold a press conference at 2.15pm.
As we’ve mentioned, the report will cover the first four rounds of hearings.
The topics covered include: consumer lending practices, financial advice, lending to small and medium enterprises, lending to agricultural enterprises, and interactions between Aboriginal and Torres Strait Islander people and financial services entities.
The report will not cover superannuation (round 5) or the insurance industry (round 6).
It has a lot of ground to cover.
The first round of hearings was in March, and it began with a bang.
On the first day, the commission heard extraordinary evidence of National Australia Bank staff being involved in an alleged bribery ring between 2013 and 2015 covering multiple branches, forged documents, fake payslips and Medicare cards, with bribes being paid in cash to secure loans as staff responded to an incentive program to sign up new customers.
The next day, NAB was chastised for withholding a document from the commission that showed its bosses knew about widespread fraud in its controversial “introducer program” months before telling the regulator.
On the third day, the Commonwealth Bank admitted that commissions it paid to mortgage brokers could incentivise them to sell risky mortgages to CBA customers, but it did not want to stop the practice until other banks stopped too. The commissioner, Kenneth Hayne, also accused CBA of being “economical with the truth.”
The next week, CBA admitted to offering repeated credit card limit increases to a customer who was begging them to stop because he had a gambling addiction and a $30,000 debt.
ANZ admitted it did nothing to verify the general living expenses of customers who had been sent to the bank from a mortgage broker, complaining it would be too complex, time-consuming, and costly to comb over every individual’s bank statements.
And Westpac Bank was criticised for being the “most resistant” to Australia’s banking laws, and the least willing to cooperate with the regulator’s attempts to enforce responsible lending practices.
You get the picture. That was only in the first two weeks.
Commissioner Kenneth Hayne said he would prepare his interim findings based on the first four rounds of hearings of the banking royal commission.
The interim report will provide important guidance on where the commission will head with its final report in February.
It won’t only be important for the thousands of people who came forward, alleging misconduct on behalf of Australia’s financial sector, but it may also influence what the Reserve Bank does next week with its interest rate decision.
Scott Morrison, who, when treasurer, repeatedly argued against a banking royal commission, did so as he said the government was already taking action, and the risk to the financial industry’s reputation could be too great.
The uncertainty around the interim report’s impact, and the royal commission’s findings as a whole, have market analysts speculating the RBA will hold interest rates at 1.5% for longer than expected.
Eyes are also turning to the dollar, to see what it will do.
There has been no shortage of ugly facts uncovered so far – cases of charges for no work, charging deceased clients, targeting the vulnerable – the list goes on.
