The Royal Commissioner Report

Running Head: The Royal Commissioner Report 1
The Royal Commissioner Report
Name
Institutional Affiliation

Background/introduction of the commission
The Banking Royal Commission, also known as the Hayne Royal Commission was established
on 14th December 2017 to investigate misconduct that was being propagated within the Banking,
Finance, and Superannuation industry. The commission was established in accordance with
Australia’s 1902 Royal Commission Act that demands enquiries are made to unearth misconduct
that may exist in the financial offering sector. A number of events led to the establishment of the
Royal Commission. First, it was the intervention by the media that brought to light the high
levels of greed in the financial sector in Australia. This was followed by a parliamentary inquiry
that established it was necessary to have a royal commission since government interventions had
failed to establish sanity in this industry. It was also realized that banks were helping drug lords
to launder money, failed to investigate terrorist’s financial activities, and failed to uphold their
statutory responsibilities by reporting irregularities in financial undertakings1(Woods, Dowd, &
Humphrey, 2008).
Why was there pressure exerted on the Federal Government to have a Royal Commission?
The establishment of the royal commission is based on the scandals in the banking sector that the
government failed to mitigate at the onset. When the scandals in the financial industry came to
light, pressure was placed on the government to conduct in-depth investigations. Primarily, the
society was angered by the aggressive marketing approaches and a culture of sales that merely
focused on profits that banks and insurance industries had adopted. Worst of all, the compliance
structure that had been established to guide the financial sector was flawed, and misconduct was
being propagated without blame being directed on any senior officials. Rather, matters were
simply being swept under the carpet and propagation of the scandals continued. Another reason
for the emphasis on the need of a Royal commission was due to the fact that banks were
deducting clients a total of $178 million for services that were never provided. The vice called
for urgent measures to be taken in order to prevent further harm from being propagated on the
society2(Hand, 2019).
What arguments did the Government and Financial Services Sector use to reject the call
for a Royal Commission?
There were elements in the government that objected he formation of a Royal Commission
primarily due to the following reasons.
Existences of committees, regulators, and inquiries.
Banks are already highly regulated and this is undertaken by the Australian Prudential
Regulation Authority (ACCC), Reserve Bank of Australia, and Australian Securities &
1 Woods, Dowd, & Humphrey, (2008). Market Risk Reporting by the World's Top Banks:
Evidence on the Diversity of Reporting Practice and the Implications for Accounting
Harmonisation.
2 Hand, G. (2019). 10 reasons not to hold bank royal commission - Cuffelinks.

Investments Commission (ASIC). Establishing a Royal Commission would create a redundancy
of duties.
Existence of very many stakeholders, and this makes it impossible to satisfy the needs of
everyone
Most of discussion involving the banking sector involve the benefits and challenges faced by
shareholders, depositors, and borrowers. There is also the government, staff, and community.
Anytime a decision is made, then fine balancing has already been achieved.
Clients are already satisfied with services that they receive from banks
As much as banks have to contend with massive criticism from the public and media, a research
into client banking satisfaction by Roy Morgan Research indicated that satisfaction levels are at
the highest and it is expected that this satisfaction level should go much higher. As much as there
may be delays relating to client interaction, the level of satisfaction is definitely much higher
than before.
What governance issues did the commission investigations and hearings identify for that
provider?
TRANSPARENCY
Transparency requires that organizations should report losses, profits, and dealings that may
considerably affect the performance of the organization. Hayne noted that IOOF had tried to hide
communication established with the Australian Prudential Regulatory Authority and Australian
Securities and Investments Commission relating to the organizations Subsidiary Questor
Financial Services3(Danckert, 2019).
OVERSIGHT ISSUES
Proper governance techniques dictate that Freedom insurance management should have
implemented Quality check measures to ensure tat service offering remained within guideline of
professionalism4 (Williams, 2019). The royal commission identified that at IOOF, proper
channels had not been established to ensure that flow of information to the top managerial team
could properly be managed.
CONFLICTS OF INTEREST
IOOF failed to regularly check for flaws that may have arisen in the process of service offering.
The royal commission noted that APRA had raised concerns repeatedly over the governance
process at IOOF. This is because decisions made by the enterprise board indicated inclination on
shareholders’ interests rather than those who are expected to benefit from superannuation funds.
3 Danckert, S. (2019). Hayne slams IOOF for 'impeding' the royal commission.
4 Williams, R. (2019). IOOF, under fire over its governance, hands in scribbled board notes.