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Tuesday 16

October, 201811:16 PM



Hayne slams greedy banks, weak regulators

Hayne slams greedy banks, weak regulators

The banks royal commissioner says greed has driven misconduct that has either gone unpunished or the consequences did not meet the seriousness of what happened.

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By AAP 28.09.2018 05:55 PM

Pure greed is behind the widespread misconduct by Australia's major banks and financial institutions who have ignored the law "because they can", banking royal commissioner Kenneth Hayne QC says.

The financial services companies appear to believe the law only applies when and if they chose to obey it and weak regulators have let much of the misconduct go unpunished, Mr Hayne's interim report concludes.

The commissioner was blunt about why misconduct had occurred in the financial services industry.

"Too often, the answer seems to be greed - the pursuit of short-term profit at the expense of basic standards of honesty," he said.

"How else is charging continuing advice fees to the dead to be explained?"

Banks searched for their "share of the customer's wallet" and rewarded staff from the executive suite to the front line by reference to profit and sales.

Mr Hayne said the banks have gone to the edge of what is permitted, and too often beyond that limit, in the pursuit of profit.

"And they have gone beyond the limit because they can and because they profit from the misconduct that is described in this report," he said.

Mr Hayne said risk to reputation was ignored and the discovery of misconduct was "managed" by words of apology and promises to do better.

"But little more was done than utter the apology and make the promise."

He said programs to compensate customers were eventually set up but usually after protracted negotiation, with profit remaining the informing value.

Mr Hayne was particularly scathing over the $1 billion, industry-wide problem of people being charged fees for financial advice when no service has been delivered, which he labelled dishonest and inexcusable.

"Whether the conduct is said to have been motivated by greed, avarice or the pursuit of profit, it is conduct that ignored the most basic standards of honesty."

Mr Hayne slammed the regulators ASIC and APRA for failing to mark and enforce the bounds of permissible behaviour, saying the misconduct either went unpunished or the consequences did not meet the seriousness of what occurred.

His interim report released on Friday noted ASIC rarely went to court to seek public denunciation of and punishment for misconduct, while APRA never did.

He said more often than not little happened beyond an apology, a drawn-out remediation program and protracted negotiation with ASIC of a media release, an infringement notice imposing fines immaterial for the big banks or an enforceable undertaking where the penalty was far less than a court could impose.

Mr Hayne criticised ASIC for adopting a starting point of resolving misconduct issues via agreement and for its reluctance to prosecute companies for the criminal offence of failing to report breaches on time.

"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 consequences of breach remedied."

Australian Banking Association CEO Anna Bligh said it was a day of shame for Australia's banks.

"There is nothing in this report for banks to feel proud of," she said.

"Too many customers have been hurt and it has to stop."

Treasurer Josh Frydenberg has demanded the banks and regulators fix an insidious culture of "greed over honesty" outlined in the report.

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