A scathing final report from the Banking Royal Commission has been released accusing banks of being driven by profit and greed and relegating customers to second place.
Royal Commissioner Kenneth Hayne has made 76 recommendations to better protect consumers including overhauling fees, regulation of the industry, restricting the sale of some products and changing the way banks deal with farmers during times of drought.
Mr Hayne has referred 22 entities to the corporate regulator for possible further action but stopped short of recommending criminal charges against any individuals.
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He said blame for misconduct in financial institutions lay squarely with the industry.
“There can be no doubt that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and those who managed and controlled those entities -their boards and senior management.”
The Federal Government has vowed to take action on all 76 recommendations.
“My message to the financial sector is that misconduct must end and the interests of consumers must now come first,” Treasurer Josh Frydenberg said.
“From today the sector must change, and change forever.”
Mortgage brokers are facing a major overhaul of the way they do business with Mr Hayne recommending a change to laws that force brokers to act in the best interests of the borrower.
The report also recommends that the broker is paid directly by the borrower, not the lender and that trail commissions on new loans be banned.
The Government has agreed to ban lender-paid commissions from 1 July 2020 and will conduct a review in three years of a borrower-pays scheme.
Unsolicited cold calls or “hawking” of superannuation and insurance products will be banned.
The report has also called for people to only have one superannuation account.
Financial advisers will be forced to renew ongoing fee arrangements annually following shocking revelations that dead people were being charged for services.
The Government has also agreed to establish a compensation scheme of last resort to be paid for by the industry.
Mr Hayne’s final report singled out the bosses of NAB for particular attention claiming they are unwilling to accept responsibility.
“Having heard from both the CEO, Mr (Andrew) Thorburn, and the Chair, Dr (Ken) Henry, I am not as confident as I would wish to be that the lessons of the past have been learned.”
“I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board dealt with some issues. I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies.”
Australian Banking Association CEO Anna Bligh says the industry accepts the findings and banks are determined to change their ways.
“Banks understand that these failures have caused deep hurt, suffering and heartache for far too many customers and they are sorry for the pain they have caused,” Ms Bligh said.
“Importantly, banks accept full responsibility for these failings and they know that they must now change to ensure this never happens again.”