SYDNEY (Reuters) - Australia's corporate regulators will be subjected to a new oversight body in a shake-up of the banking sector recommended on Monday by a high-powered independent inquiry into financial sector greed and malpractice.
The government-appointed inquiry known as a Royal Commission also advised in its landmark report that remuneration structures across the industry be overhauled to remove systemic conflicts of interest.
The commission's recommendations were released by the government after 11 months of shocking revelations of financial wrongdoing which wiped A$60 billion (33.22 billion pounds) from the country's top finance stocks.
Following are reactions to the report's recommendations:
MATT COMYN, CEO, COMMONWEALTH BANK OF AUSTRALIA:
"Commissioner Hayne has called out the clear need for change...We note that the Commissioner has concluded that a number of matters regarding the group’s conduct including in relation to superannuation warrant further investigation by relevant regulators and we will cooperate fully with these investigations...The Royal Commission has been a thorough and valuable process for everyone – bank customers, financial services institutions, regulators and policy makers. It has highlighted failings both in our business and across the wider financial services industry. As challenging as the Royal Commission process has been, CBA will be a better bank as a result."
ANNA BLIGH, CHIEF EXECUTIVE, AUSTRALIAN BANKING ASSOCIATION:
"This Commission has put the entire banking sector under the microscope. Its final report lays bare how banks have too often failed their customers and let down the Australian people. Banks understand that these failures have caused deep hurt, suffering and heartache for far too many customers and they are sorry for the pain that they have caused. Importantly, banks accept full responsibility for these failings and they know that they must now change to ensure that this never happens again. Banks are determined to learn the lessons, to fix the problems and to make it right."
JAMES SHIPTON, CHAIRMAN, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION:
"The Royal Commission report identified ASIC's enforcement culture as the focus of change needed at ASIC. This focus accords with ASIC’s change agenda...ASIC notes the serious matters referred by the Royal Commission of possible breaches of financial services laws. Consideration of these matters will be prioritised. ASIC does not, as a general policy, comment on actual or potential investigations."
WAYNE BYRES, CHAIR, AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY:
"The Commission's recommendations are wide-ranging; within them, the Commission has identified a number of areas where APRA’s prudential and supervisory framework can and should be strengthened. Many of these improvements are already in train, and APRA is committed to delivering on them. APRA appreciates the Commission's acknowledgment that increasing the intensity of supervision will require additional resources."
JULIA ANGRISANO, NATIONAL SECRETARY, FINANCE SECTOR UNION:
"This should have been a Royal Commission which would begin a major fix for the financial services industry. Instead, it has failed to deal with many of the problems, and kicked other problems to the regulators to deal with.
"The Union is particularly disappointed in the failure of the Commission to make recommendations concerning genuine limits on executive pay and bonuses; changes to remuneration models for variable pay and conflicted pay for staff who are neither front line employees nor executives; any focus on criminal liability for senior executives who wilfully breach obligations."
ROB WHELAN, CEO, INSURANCE COUNCIL OF AUSTRALIA:
The Insurance Council of Australia and its members pledge to do better and to continue to be held accountable.
"The conclusion of the Royal Commission is an opportunity for the financial services sector to start afresh, improve business practices and cultures, and put customers at the forefront of our thinking.
"Repairing public confidence in general insurance is essential if we are to continue to provide effective and efficient risk-based products to households, businesses, governments and the broader community."
EMMA MITCHELL, MANAGING SOLICITOR, CONSUMER CREDIT LEGAL SERVICE (WA):
"We think it's a really good report from a consumer advocacy perspective. The Commissioner has made a lot of comments in there about closing loopholes. There are really very little changes that the Commissioner has recommended in terms of existing laws, but what he wants to do is tighten up loopholes around services that aren't currently regulated...There was a recommendation that there shouldn't be any chances made for small business lending...that was a little bit disappointing."
ANDREW GRANT, SENIOR FINANCE LECTURER, UNIVERSITY OF SYDNEY:
"(Commissioner Kenneth Hayne) has identified core aspects where things could be improved and this could include the application of the law ... making sure that intermediaries act on behalf of the parties who pay them, and making sure that conflicted remuneration and culture are both improved in the industry."
ANDREW TICEHURST, STRATEGIST, NOMURA:
"The key macro issue we have been interested in is if this was going to further reduce the banks' willingness to lend, which would be a further headwind to the economy which is already under some pressure. At this stage, it does not appear to be the case. It would be a bit milder than expected."
XAVIER O'HALLORAN, HEAD OF ADVOCACY, SUPERANNUATION CONSUMER CENTRE, CHOICE:
"I think Commissioner Hayne has sent a pretty clear message that the days of industry self-regulation are over and he's outlined a number of measures that will really make enforceable the kind of codes the industry has been relying on - installing penalties in areas where they didn't exist before and therefore there wasn't enough incentive of industry to really act in their customers best interest - so big changes in the kind of framework.
"In the past, the first response from industry has always been to introduce some kind of self-regulatory measure and say the problem was solved. But he's basically torn these codes apart and said they're not good enough, they're not enforceable and they don't really come with any adequate sanctions to drive good outcomes for consumers."
THOMAS CLARKE, PROFESSOR, UTS BUSINESS SCHOOL:
"It is a serious and heavyweight report on the Australian banks. It will change the industry perhaps fundamentally. A great deal of that does depend on ASIC and APRA implementing fully the report. But both organisations have been stiffened up and better resourced and told that they have to take more robust action to eliminate misconduct in the Australian banking industry.
"The Australian banking industry has been the most profitable and the most concentrated in the industrial world for two decades. It's had an extreme run of unbelievably high profits, bonuses and dividends. I think we'll see a reduction in these excesses and a banking industry that is more focussed on the client's interests, customers' concerns and hopefully an industry that's a little less concentrated with more competition and more focus."
DAVID ELLIS, BANKING ANALYST, MORNINGSTAR
"I think this is a good outcome for the major banks. A lot of people were expecting more draconian and more stringent or strident recommendations that potentially could have impacted the business models of the major banks.
"The commentary on NAB's senior management was a little bit disturbing for them I think, potentially leading to a change in CEO and a change in Chairman."
EUGENE ARDINO, CEO, LIFESPAN FINANCIAL PLANNING:
"While there are some recommendations that, if implemented, will improve the financial planning industry, there are a number of others that could have severe unintended adverse consequences for consumers.
"We believe that the axing of trailing commissions as well more onerous requirements around ongoing service fees being paid is likely to lead to a dramatic increase of up-front fees. A major consequence will be that fewer people are able to afford advice."
(Reporting by Byron Kaye, Melanie Burton and Tom Westbrook; Editing by John Mair and Sam Holmes)