Australia’s investigation into misconduct within its financial-services sector has identified “greed” as the key reason banks and other financial institutions repeatedly broke the law.
The Royal Commission’s interim report, spanning three volumes and 1,000 pages, concludes that Australia’s banks have built every part of their operations around selling, to maximise profits, at the expense of serving their customers’ needs.
“Selling became their focus of attention. Too often it became their sole focus of attention. Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’. From the executive suite to the front line, staff were measured and rewarded by reference to profits and sales… How else is charging continuing advice fees to the dead to be explained?” the report says.
Federal Treasurer Josh Frydenberg has castigated regulators ASIC and APRA for “working too closely” with the banks and failing to crack down on the systemic abuses of power in the banking sector, despite the wrongdoing exposed in the Royal Commission already being illegal.
“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done,” the interim report says, pointing out that Asic “rarely went to court to seek public denunciation of, and punishment for, misconduct, and Apra “never went to court”.
The Royal Commission has heard a number of bad practices the country’s banks, insurers, financial advisers and others have committed, from charging dead people fees to duping the corporate regulator.
“The interim report … shines a very bright light on the poor behaviour of our financial sector,” the treasurer said.
“Banks and other financial institutions have put profits before people.”
He said that “much more often than not” the kinds of conduct exposed in the Royal Commission was already “contrary to law”, suggesting the problem was therefore more to do with enforcement failures than with a gap in the law.
Activities like charging fees to dead people or kickbacks being paid to financial advisors who granted risky loans were already against the law.