Banking Royal Commission: Criticisms, Recommendations, and Impact

This report analyzes the 2018 Banking Royal Commission's (BRC) criticisms of Australia's financial regulators, the Australian Securities and Investment Commission (ASIC) and the Australian Prudential Regulation Authority (APRA). The BRC identified failings by these 'Twin Peaks' regulators as a major cause of misconduct in the financial industry. The report outlines a major criticism levied by the BRC on the regulators, which is the failure to address the issues of misconduct at the time of investigation and critically evaluates the associated recommendations made by the BRC intended to address this criticism, including recommendations for enhanced professional and regulatory supervision, better supervision of remuneration and the establishment of new oversight authorities. The report further discusses the implications of these recommendations on the financial sector and concludes with a summary of the key findings and their significance.

Running head: REPORT 0
FINANCIAL MARKETS
AND INSTITUTES
JUNE 14, 2019
STUDENT DETAILS:

REPORT 1
Contents
Introduction...........................................................................................................................................2
Criticism levied by Banking Royal Commission on regulators.............................................................2
Recommendations made by Banking Royal Commission in relation to criticism..................................3
Conclusion.............................................................................................................................................6
References.............................................................................................................................................7
References.............................................................................................................................................8

REPORT 2
Introduction
The Royal Commission has recognised important failures in a significant manner to handle the
customers by financial system. It is stated by Commission that there is no confusion about the key
obligation regarding misconduct in financial service sector, which lies with companies concerned and
entities who regulated these corporations. However, the range of areas is also identified by Royal
Commission, in which the management or administration of financial organisations should be
supported. The Australian Prudential Regulation Authority will evaluate the recommendation in a
report of future period and issue the more comprehensive reaction to the recommendation relevant
to Australian Prudential Regulation Authority in a while. APRA is satisfied that various
recommendations made in Report, and supported by government, are constant with submission
APRA made to BRC. It includes the preservation of twin peaks regulatory architecture, and current
mandate of APRA, and broadening of the Bank Executive Accountability Regime to different sectors.
In the following parts, criticism levied by BRC on regulators and recommendations made by BRC is
discussed and analysed.
Criticism levied by Banking Royal Commission on regulators
The bank, superannuation fund as well as insurer would require to make payment of additional
supervisory charges following Royal Commission into misconduct in sector of finance. In a paper, it is
discussed that the Australian Treasury suggested that insurer, super funds and banks should jointly
make payment of 236 million Australian dollars in charges for year 2019-2020. This whole subsidy is
increased by 236 million Australian dollars (10.6% increase) from the year 2018-2019. It is said by
the government that this increment because of the additional funds, is needed for the extended
purposes of financial regulators. The super funds as well as banks would make a payment of the
higher charges, with bank anticipated to give 90.8 million Australian dollars for the fiscal year.

REPORT 3
Further, the super funds anticipated to make payment of 89.1 million Australian dollars (Legg and
Speirs, 2019).
The APRA is set to get the bulk of funding, with 186.1 million Australian dollars budgeted to the
regulators for the fiscal year, up 31% from the 141.6 million Australian dollars budget in year 2018-
2019. The Australian Prudential Regulation Authority and the regulator ‘Australian Securities and
Investments Commission’ had greatly criticized through Banking Royal Commission for not
succeeding to state the matters of misbehaviour that were noticed at the time of investigation.
Further, it is recommended by the royal commission that the Australian Security and Investment
Commission renovate the strategy to implementation. Still, the financial organisations have to give
reaction on the proposal of Australian Treasury (Winter, 2019).
Recommendations made by Banking Royal Commission in relation to criticism

REPORT 4
It is highly recommended to enhance the professional as well as regulatory supervision
to avoid the risks associated with above-mentioned criticism (O’Brien, 2019). The forecasts
for a marketplace of Australia are twofold-
1. The increment in regulatory supervision as well as earlier investigation of the extra-banking
services being proposed by bank
2. The prospective ‘professionalization related to the financial counselling sector, with the
specific focus upon the counsellor in a bank, with extra obligations and the new penalizing
authority on a horizon
Both of these carry the improved claim risks, for a bank as a whole but also the counsellors must
follow the recommendations made by the Royal Commission. Further, the Australian Prudential
Regulation Authority must set the target for better supervision of remuneration (Bulmer, 2015). The
management of Australian Prudential Regulation Authority should not work only for financial risks
but also for non-financial risks, wrong doings, compliance, and misbehaviour. It is also required by
the Australian Prudential Regulation Authority to set limitations on the utilisation of financial metrics
in relation to long-run inconstant remunerations. There must be prohibition on the reduction of
consultation fee from MySuper account. Furthermore, there should also be a prohibition on the
dealing of the superannuation products. It is required that the workers must have separate default
superannuation fund. There should be extension of the Banking Executive Accountability
administration to all the Register of Superannuation Institution licenses (Beck and Paton, 2018).

REPORT 5
Additionally, it is required that the twin peaks model of financial regulations should be reserved. The
Australian securities and Investments Commission is required to utilise the infringement notice
primarily for the regulative failing. This is hardly a proper application device wherever the big
company is the trespassing member. In addition, the approach followed by ASIC to enforcement
must commence with deliberation of whether the court must decide the significances of the
infringement. It is essential that the Australian securities and Investments Commission must be
provided the powers to implement the requirements of SIS Act. It is also recommended to establish
the new oversight authorities for Australian securities and Investments Commission and Australian
Prudential Regulation Authority to make sure that they are executing their accountabilities. It is also
required to establish the sector funded compensation plan of previous resort for those not able to
get compensation from the financial organisation (Boyle, 2016).

REPORT 6
Conclusion
As per the above discussion, it can be concluded that the main duty for misconduct in financial
service sector lies with corporations concerned as well as the board and top executives. As a result,
the closer attention should be required to the governance, culture, as well as remuneration practice.
It is necessary that the customers should overview the ongoing fees arrangement on per annum.
Must also consider decreasing the cap over commission regarding the products related to life risk
insurance.

REPORT 7
References
Beck, J. and Paton, G. (2018) Corporate law: The Royal Commission: Corporate culture spotlight:
Where is all this heading?. Governance Directions, 70(6), p.351.
Boyle, P. (2016) We need an inquiry into the banking industry. Green Left Weekly, (1087), p. 6.
Bulmer, M. (2015) Social Research and Royal Commissions (Routledge Revivals). New York:
Routledge.
Legg, M. and Speirs, S. (2019) Litigation: Why not litigate?: Asic enforcement after the banking royal
commission. LSJ: Law Society of NSW Journal, (54), p.70.
O’Brien, J. (2019) “Because They Could”: trust, integrity, and purpose in the regulation of corporate
governance in the aftermath of the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry. Law and Financial Markets Review, pp.1-16.
Winter, J. (2019) Financial services Royal Commission-impacts on our profession?. Australian
Restructuring Insolvency & Turnaround Association Journal, 31(1), p. 10.

REPORT 8
References