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Royal Commission

Industry progress since the Royal Commission

A lot has changed since the Royal Commission. Banks have been held to account, and are now subject to stronger laws. They’re also transforming their culture, and putting customers first.

Key changes

Banks are now required by law to design their products with their customers’ needs in mind. They’re banned from pushing sales for extra products and services, and they’re required to give customers four days before selling add-on products. They also report more breaches to ASIC.

Banks’ actions during the pandemic – deferring loan repayments on over a million loans – was a clear sign that the industry had turned a corner and is putting the needs of customers first.

Since the Royal Commission, Australian banks have:

  • The Banking Code has stronger protections for culturally and linguistically diverse customers and those with Aboriginal or Torres Strait Islander heritage (Rec 1.8);
  • Stronger protections for farmers and agricultural loans in the Banking Code. (Recs 1.13, 1.14).
  • Principals now in place for agribusiness: rural loans are managed by experienced rural bankers; early offer of farm debt mediation; manage every distressed rural loan to try to achieve best outcomes for the borrower and the bank; stop charging default interest on rural loans when there is no real prospect of recovering the money.
  • Design and distribution obligations ensure meeting customers’ needs is the focus of banks’ business models.
  • Financial advisers must renew ongoing fee arrangements with their customers each year (Rec 2.1).
  • A new mandatory four day pause between the sale of a product and the sale of add-on insurance (Rec 4.3)
  • Access to compensation for unpaid claims to insolvent financial firms (expected to be introduced by end-2021) (Rec 7.1)
  • Fully implemented the recommendations of the Sedgwick Review by 2020.
  • Changed the way front-line staff are paid, ending 100% sales driven targets and creating new incentives based on other metrics such as good customer outcomes (Recs 5.4, 5.5)
  • Banned grandfathered commissions for staff, removing the risk of inappropriate advice being provided to clients (Rec 2.4).
  • Stronger reference checking protocols in place to check the credentials and behaviour of mortgage brokers and financial advisors (Recs 1.6, 2.7).
  • Ended hawking and pressure selling of superannuation and insurance products (Recs 3.4, 4.1).
  • Removed unfair contract terms in insurance products (Rec. 4.7).
  • Overhauled their complaint management systems to respond faster and more fairly to customers with a complaint.
  • Mortgage brokers face fines if they do not act in the best interests of the customer (Rec 1.2)
  • A stronger framework for enforcement of industry codes (Recs 1.15, 1.16)
  • Conflicted remuneration for mortgage brokers is banned (Rec 1.3).
  • Banks and other financial firms must cooperate with AFCA to resolve customer disputes (Rec 4.11)
  • Tougher ASIC powers to address misconduct, increasing penalties and prison terms (Rec 7.2)
  • Stronger accountability measures for financial sector executives (expected to be introduced by end-2021) (Recs 3.9, 4.12, 6.6, 6.7 and 6.8)
  • Financial advisors must declare to clients if they are not independent, impartial or unbiased (Rec 2.2).
  • Banks must report much more information about compliance breaches to the regulators, including notifying, investigating and remediating misconduct by financial advisors (Recs 2.8 and 2.9).

“Banks are determined to learn the lessons, to fix the problems and to make it right. Australians expect better from their banks, and more than that, they deserve better.”

ABA CEO Anna Bligh (2019)

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established by the Government in December 2017, with the first of seven public hearings held in March 2018, and the final round held in November 2018. The Federal Government released the Final Report on Monday 4 February 2019. The three volumes of the Final Report can be downloaded below.

Royal Commission: Final Report

Final Report: Volume 1

“The central task of the Commission has been to inquire into, and report on, whether any conduct of financial services entities might have amounted to misconduct and whether any conduct, practices, behaviour or business activities by those entities fell below community standards and expectations.”

Volume 1: Final Report

Download Volume 1

Volume 2: Case Studies

This Report sets out, in Volume 2, the findings I make in respect of case studies considered during the rounds of hearings concerning superannuation and insurance.”

Volume 2: Case Studies

Download Volume 2

Volume 3: Appendices

Other work done outside the hearing room included the preparation of background and research papers. Some of those papers were published in Volume 3 of the Interim Report; the balance of them appear in Volume 3 of this Report.”

Volume 3 : Appendices

Download Volume 3