Report finds banks driven by greed
OUT-OF-CONTROL banker greed and weak corporate cops are to blame for the nation’s financial scandals, royal commission chief Kenneth Hayne says.
In a “day of shame” for the nation’s lenders, Mr Hayne squarely blamed a culture of fat cats lining their pockets at customers’ expense.
“Too often, the answer seems to be greed — the pursuit of short-term profit at the expense of basic standards of honesty,” he said in a blistering report. “How else is charging continuing advice fees to the dead to be explained? It is necessary to go behind the particular events and ask how and why they came about.”
The findings were delivered in Mr Hayne’s interim report into the first four rounds of hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which took place between March and June this year.
It sets the scene for Mr Hayne and his team of QCs to focus on the bank bosses at the next round of public hearings starting on November 19.
Mr Hayne suggests removing banker bonuses linked to sales and profit: “If customerfacing staff should not be paid incentives, why should their managers, or those who manage the managers?”
He also flags beefing up the Federal Government’s move to crack down on banker pay, the Banking Executive Accountability Regime.
He is scathing of the corporate regulators, including the Australian Securities and Investments Commission, and the Australian Prudential and Regulatory Authority.
He says ASIC rarely went to court to seek denunciation and punishment for misconduct, while APRA never went to court. He says the penalties imposed were immaterial for the large banks.
Mr Hayne describes ASIC as a gun-shy regulator, which responds to misconduct by seeking to resolve it via agreement with a financial institution rather than prosecution.
ASIC’s chair James Shipton remained tight-lipped after copping a hiding from Mr Hayne. He said ASIC noted the report’s serious and important observations of ASIC’s role as a regulator.
Australian Banking Association’s chief executive officer Anna Bligh said the interim report “makes a day of shame for Australia’s banks”.
Mr Hayne raises more than a hundred questions about possible reform areas, including conflicts of interest around mortgage brokers, whether to tighten mortgage assessment criteria, and if banks should own companies that manufacture wealth products. One of the main questions is if new regulatory laws are needed or whether existing laws need to be simplified and enforced.