Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry

This article discusses the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and its focus on ethical values in economic decisions. It covers the interim report, recommendations, and the impact on various sectors such as superannuation, compensation for consumers, oversight of regulators, mortgage brokers, and the financial industry regulator. The article also highlights the need for structural reform and the promotion of a strict code of ethics in the financial services sector.

Running head: ECONOMICS
Economics
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ECONOMICS
The Royal Commission into Misconduct in the Banking, Superannuation and Financial
Services Industry in light of the role of ethical values in economic decisions.
Discussion of the article
The banks are known to have a special place in the economy. The Royal Commission
into Misconduct in the Banking, financial services and superannuation had been established
in 2017. Banks are often known to face conflicts of interest when it comes for advising their
customers (ABC News. 2019). The interim report of the Royal Commission into the
Misconduct in the Banking, superannuation and the Financial services Industry have released
its interim report at the end of September.
The Royal Commission into Misconduct in the Banking, superannuation and the
Financial Services industry had been established in December 2017. The interim report had
been published on 2018 and covers customer lending, small and medium sized enterprise and
financial advice. The Royal Commission has been launched in December 2017, which
follows the claims of consumer base, poor governance along with unethical lending practices
which are adopted by banks. The final report that is provided care known to contain key
observations along with many recommendations with the view of a structural reform. The
Royal Commission into the Misconduct in the Banking, Superannuation and Financial
services industry known to have shone a spotlight on the sector. The final report of Kenneth
Hayne known to offer more than 70 recommendations, which the Federal government and
Labour will be supporting.
The three particular issues which are related to the article are

ECONOMICS
Superannuation
Australian Securities and Investment Commission (ASIC) will become the regulator
overseeing superannuation. It will also have the power of creating civil penalties for not
following the laws governing superannuation trustees. The hawking of the products of
superannuation is also not allowed so that people cannot sell superannuation products in the
unsolicited manner. The royal commission have also recommended the banking executive
accountability regime which governs the responsibility when the issues arises. There is also
presence of new protections in order to make sure that the superannuation fund members
should be having only one account (ABC News. 2019). The royal commission known to have
recommended deductions for any advice fees that needs to be prohibited from the account of
My Super.
Compensation for consumers
The government is also known to establish compensation scheme for allowing the
consumers and the small businesses which have not succeeded to have their cases heard. The
government will also be paying $30 million to the small businesses for the unpaid
determinants from the Financial Ombudsman Service. This particular scheme introduced by
the government will be paying compensation where a tribunal have ruled in favour of the
consumer.
During the investigation of misconduct Commissioner Hayne have observed that the
level of conflict of interest had been quite alarming due to the constant pursuit of the goals
along with lack of ethical remuneration structure. It was also observed that there has been no
separation of duties between the provisions of the financial device. The National Australia
Bank will also stop paying commissions to the members of the public who will be referring
new home loan consumers to the bank.

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The royal commission have recommended of retaining the twin peaks model for the
financial regulations. It have also stated that Australian Prudential Regulation Authority will
be responsible for the prudential regulation and the Australian Securities and Investment
Commission will be primarily regulating conduct as well as disclosure (ABC News. 2019).
The final report also recommends financial watchdogs which considers criminal charges
against the unnamed organizations. There have been various scandals which involves people
being charged lump sum fees even after they had died. According to the final report it was
estimated the scandal would be costing he wealth managers a worth of $850 million in
compensation.
The banking royal commission calls for the compensation, an overhaul and crackdowns of
the financial regulators.
The worst fears of the mortgage broking industry are known to be present in the final
report where the Royal commission recommends the industry to move from a commission
based to a fee based model. The article states that brokers receive upfront and trailing
commissions from banks as well as other lenders. The government is known to ban trail
commissions and will also ban inappropriate forms of lender paid commissions on the new
loans from July 2020. It will conduct a review for three years to consider the implications of
removing the up confront commissions.
Oversight of the regulators
Both the APRA and ASIC will also be receiving greater oversight with the creation of
an independently chaired regulator which ensures that the regulators are being held
accountable for their actions. Some of the main issues which have emerged from the first
round of the hearings comprise the failure of the banks to self report misconduct. It also takes
into consideration the conflicts of interest which arises from the incentive structures for bank

ECONOMICS
employees and third party intermediaries (ABC News. 2019). The second hearing of the
Royal Commission which took place in 2018, and known to focus on the financial planning
and industry of wealth management which explores the topics of fees for no service,
investment platform fees and inappropriate financial advice.
Mortgage brokers
The fears of the mortgage broking industry are contained in the final report where the
commission recommends the industry to move from a commission based model to fee based
model. Hayne recommends that breaching any kind of law can impose a severe penalty to the
broker. The mortgage brokers can in the future become the financial advisers. The report
also states that ASIC should be capping the commission which the car dealers are known to
earn for selling add on insurance. Many banks closed in the fear of embarrassing publicity in
the sandal prone industries. Secondly, there is no existence of returns. The life insurance
which as delivering a 15 percent return on the assets which dropped below 10 percent along
with tough regulations. Supervision of culture and governance due to poor culture and values.
The financial institutions have failed to meet the evolving expectations of the evolving
society. APRA should be designing a culture and governance framework which will be
endorsed as well as adopted by all the entities which re APRA regulated. The final report also
states that the scandal will cost the major banks $900 million in compensation. The article
also states that the royal commission have recommended the bans along with the wealth
managers from being banned from owning advice business.
Financial industry regulator
In the Australian system of government, the royal commission is known to be the
highest form of inquiry on the matters which are of public importance. The Royal
Commission into Misconduct in the Banking, Superannuation and financial services industry

ECONOMICS
that has been established on 14th December 2017. In the year 2018, Commissioner Hayne
known to have submitted interim reports on the progress of the commission to the governor
general (ABC News. 2019). However, the federal government will be deciding whether or
not to adopt all the parts of the recommendations made .The final report that is provided care
known to contain key observations along with many recommendations with the view of a
structural reform. The Royal Commission into the Misconduct in the Banking,
Superannuation and Financial services industry known to have shone a spotlight on the
sector. The final report of Kenneth Hayne known to offer more than 70 recommendations,
which the Federal government and Labour will be supporting.The recommendations provided
by the royal commission will be contributing for enhancing the integrity of the financial
services sector and will also promote the application of strict code of ethics in the industry.
Conclusion
The report also recommends clearing of the questions of who the mortgage broker is
known to act on behalf of. The following news article mainly states the banking royal
commission which calls for compensation along with an overhaul of financial regulators.
Hawking of the products of superannuation is also known to be prohibited in a bid for
preventing the people to sell annuation products in an unsolicited manner which can lead to
people selecting products which are not in their best interest. .There is also presence of new
protections in order to make sure that the superannuation fund members should be having
only one account. The royal commission known to have recommended deductions for any
advice fees that needs to be prohibited from the account of My Super. The article states that
brokers receive upfront and trailing commissions from banks as well as other lenders. The
government is known to ban trail commissions and will also ban inappropriate forms of
lender paid commissions on the new loans from July 2020. It will conduct a review for three
years to consider the implications of removing the up confront commissions.

ECONOMICS
Reference list
ABC News. (2019). Banking royal commission - ABC News (Australian Broadcasting
Corporation). [online] Available at: https://www.abc.net.au/news/story-streams/banking-
royal-commission/ [Accessed 2 Apr. 2019].
ABC News. (2019). Banking royal commission report at a glance. [online] Available at:
https://www.abc.net.au/news/2019-02-04/banking-royal-commission-report-at-a-glance/
10777188 [Accessed 2 Apr. 2019].
Hayne, D.M., 2018. Submission in response to the Interim Report of the Royal Commission
into Misconduct in the Banking, Superannuation and Financial Services Industry.
The Conversation. (2019). Banking Royal Commission: How Hayne failed remote Australia.
[online] Available at: https://theconversation.com/banking-royal-commission-how-hayne-
failed-remote-australia-111100 [Accessed 2 Apr. 2019].