MAF202: Banking Royal Commission and Financial Sector Reforms Report

This report analyzes the recommendations of the Royal Banking Commission concerning misconduct in the Australian financial sector. It focuses on two key areas: the reform of remuneration and governance, and the implementation of measures to assist farmers and small businesses. The report examines the identified issues of remuneration and rewards, suggesting improvements guided by the Australian Prudential Regulation Authority (APRA), including the management of non-financial risks and clawbacks. It also explores the proposed compensation schemes and farm-debt mediation to support consumers and small businesses. The conclusion highlights the significance of the financial sector's role in economic and social advancement while acknowledging the discrepancies that led to the Royal Commission's inquiries. The report references key sources and provides a comprehensive overview of the commission's impact and recommendations, aiming to promote fair dealings within the financial sector.

TASK 3 1
In the wake of the initiation of the inquiry into the misconducts of the financial sector by the
Royal Banking Commission, a list of 76 recommendations have been proposed for the
Australian finance industry (Johnson, 2019). The two of the proposed recommendations are
explained as follows.
One of the major identified in the said financial misconducts is stated to be the “issue of
remuneration and rewards” for the individuals, which is stated to be the root cause of all the
issues in the financial services industry. Thus, as recommended by the Royal Banking
Commission, a great extent of efforts are needed to improve the remuneration and overall
governance culture by the companies, on lines of the guidance of the Australian Prudential
Regulation Authority (APRA). It has been recognised in the report of the commission, that
there is a direct connection between the “conduct and reward.” In the words of the
commissioner, the conduct of the entities are either driven by the pursuit for the profits or
individual greed for personal gains. In this relation, APRA is prescribed to conduct prudential
supervision of remuneration systems, and revise the standards and guidelines as per the
Financial Stability Board’s publications (PWC, 2019). This includes sound management of
non-financial risks in the remuneration systems, to claw back remuneration that has vested
when appropriate, and the quality information being provided about risk management
performance and remuneration decisions to the board and committees.
I believe, it would be a significant move towards the enhancement of the overall corporate
culture which is comprised of tangible financial benefits through which the prime objectives
of the businesses such as the employee attraction and retention, customer satisfaction and
ultimately, shareholder value are achieved. If the variable remuneration structures are
efficiently designed, ethical behaviour and compliance with laws and standards would be
promoted in the organisations. Therefore, it would be appropriate to establish such reforms in
the organisations.
The second major recommendation that has been proposed by the Royal Banking
Commission for the financial sector are in the form of reformatory measures for the farmers
and small businesses. One of which is the provision of compensation scheme as a last resort
means to allow the cased being heard of the consumers and small businesses, who have been
failed by financial firms (Chalmers and Worthington, 2019). Another measure that has been
recommended for the farmers and small businesses is the creation of a national farm-debt-
mediation scheme, which is aimed at assisting the borrowers to address financial difficulties

TASK 3 2
that have led the loans to become, distressed (Kehoe, 2019). The point of view of the
government behind such a move is to facilitate mediation before the initiation of the
enforcement action. The recommendation will include the ensuring of the independent
agricultural-land valuations being carried out to evaluate the events that might be needed to
sell the land for a fair value. Further, it is recommended for the banks that agricultural loans
are managed by experienced agri-bankers.
It is yet another major move towards the refinement of the financial sectors. This is because,
a number of cases had featured in the inquiry where the farmers and small businesses were
either forced off their properties or harassed by the banks and financial institutions. This was
in addition to such famers and small businesses not able to receive adequate legal and other
assistance in appropriate period, which led their loans becoming further more distress and
loss to the banks and forcing them to exercise the unresponsive behaviour.
Conclusion
As per the discussions conducted in the previous parts, it can be stated that the financial
sector plays a significant part in the economic and social advancement of a region and its
citizens. However, as stated in the earlier parts, a number of discrepancies in the Australian
financial sector were observed which was ought to be regulated by the regulators and
therefore Royal Banking Commission had initiated enquiries against a number of
organisations belonging to the Banking, Superannuation and Financial Services Industry. A
number of major scandals gave an insight of the fact that certain areas need to be refined in
order to render the best possible services to stakeholders. The work further shed light on two
chief recommendations of the Royal Commission which are proposed to being fair dealings
in the financial sector.

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References
Chalmers, S. and Worthington, B. (2019) Banking royal commission calls for compensation,
crackdowns and an overhaul of financial regulators [online] Available from:
https://www.abc.net.au/news/2019-02-04/banking-royal-commission-report-at-a-glance/
10777188 [Accessed on: 12/04/2019].
Johnson, E. (2019) Key Takeaways and Recommendations From Australia's Bank Inquiry
[online] Available from: https://www.bloomberg.com/news/articles/2019-02-04/key-
takeaways-and-recommendations-from-australia-s-bank-inquiry [Accessed on: 12/04/2019].
Kehoe, J. (2019) Banking royal commission: Farmers, small business gain [online] Available
from: https://www.afr.com/business/banking-and-finance/banking-royal-commission-
farmers-small-business-gain-20190204-h1atk8 [Accessed on: 12/04/2019].
Price Waterhouse Cooper (2019) Financial Services Royal Commission Final Report:
Remuneration Recommendations [online] Available from:
https://www.pwc.com.au/consulting/assets/publications/10-minutes-on-rc-final-report-
feb2019.pdf [Accessed on: 12/04/2019].