Tom Elliott makes a prediction in wake of Banking Royal Commission
Tom Elliott makes a prediction in wake of Banking Royal Commission
Commbank is one of the banks under scrutiny.. Image Getty Images
07 February, 2019, 22:07
The Australian government is due to release on Monday the final recommendations of the independent inquiry that exposed systemic wrongdoing in Australia's financial sector previous year, likely leading to sweeping changes to the country's banking industry.
The inquiry uncovered banking practices where customers were charged about $1 billion in fees for no service, dead customers were charged fees, and people were given poor financial advice or bullied into buying inappropriate insurance and high-interest loans. The government also took advantage of public anger at the industry to pass a bank levy in 2017 that will cost the big four lenders and Macquarie Group Ltd. A$6.2 billion ($4.4 billion) over four years. The inquiry said it would be costly and disruptive to separate banks providing products and advice. "I don't think that the Royal Commission did anywhere near enough to cover what's needed there".
"There is time to give some very careful reflection as to whether we want to argue in favour of the status quo or move to a different position".
Australia's Federal Government has said it will implement the recommendations which include a dramatic shake-up of the mortgage broking industry. "Major Banks breathe a sigh of relief", suggests Citi. Pay and bonuses have been overhauled to focus more on customer satisfaction than sales targets.
"The price paid by our community has been huge and goes beyond just the financial".
"It's a scathing assessment of conduct driven by greed, which fell far below community expectations", Treasurer Josh Frydenberg said.
Mortgage brokers, however, were hit hard after the inquiry recommended banks should stop paying them trailing commissions - fees lasting the life of a product which were found to incentivise misselling.
Regulators also needed greater oversight after they were accused of working too closely with the banks.
The report made very strong criticisms of both regulators for failing to prevent malpractice in the industry.
"The soft recommendations of the Royal Commission final report is a clear win for the banks", UBS Group AG analysts led by Jonathan Mott wrote in a note.
However, wealth managers, whose reputations were shredded in the inquiry, were punished with IOOF Holdings Ltd stock closing down 4.5 percent and AMP sliding to a record low.
"At this stage, it does not appear to be the case".
"It beggars belief that a royal commission set up to look at the banks' failure to act appropriately has been turned around so that brokers are now potentially the biggest losers", Mr Bailey said.
"By the time of the review referred to in Recommendation 2.3, these exemptions from the ban on conflicted remuneration will have been in place for nearly 10 years", Commissioner Hayne says. Prime Minister Scott Morrison had also warned that tighter lending rules could have triggered an economically damaging credit freeze.
"That is, there remains a reluctance in some entities to form and then to give practical effect to their understanding of what is ethical, of what is efficient, honest and fair, of what is the right thing to do", the report said.
The Australian Banking Association (ABA) is expected to hold a press conference shortly.
The big banks, insurers, pension funds and regulators who oversee the financial industry are bracing for a brutal summary of their misdeeds and weaknesses, and a list of tough recommendations including possible criminal charges.
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