Federal Treasurer Josh Frydenberg has castigated regulators ASIC and APRA for “working too closely” with the banks and failing to crack down on the systemic abuses of power in the banking sector, despite the wrongdoing exposed in the Royal Commission already being illegal.
The commission, led by Commissioner Kenneth Hayne QC, unveiled its nearly 1000-page on Friday following months of hearings that have exposed serious wrongdoing, including predatory lending practices, involving some of the country’s biggest banks and financial firms.
“The interim report … shines a very bright light on the poor behaviour of our financial sector,” the treasurer said.
“Banks and other financial institutions have put profits before people.”
Treasurer Josh Frydenberg responds to the Royal Commission's early findings Source: SBS
Mr Frydenberg said it was clear the regulators had been "working to closely with the sector that they were regulating", but touted recent funding boosts designed to boost their capacity.
Commissioner Hayne will make more extensive recommendations in his final report, but the key findings so far illustrate the failings of the regulator: the Australian Securities and Investments Commission.
“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done,” the commissioner wrote in his executive summary.
Commissioner Kenneth Hayne Source: AAP
“The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct.
“The prudential regulator, APRA, never went to court.”
He said that “much more often than not” the kinds of conduct exposed in the Royal Commission was already “contrary to law”, suggesting the problem was therefore more to do with enforcement failures than with a gap in the law.
Activities like charging fees to dead people or kickbacks being paid to financial advisors who granted risky loans were already against the law.
“Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct.”
Commissioner Hayne suggested there was no point duplicating existing laws when there were serious problems with enforcement.
“Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain?” he wrote.
"Too often, the answer seems to be greed - the pursuit of short-term profit at the expense of basic standards of honesty.
"How else is charging continuing advice fees to the dead to be explained?"
The government has repeatedly offered to grant the Royal Commission more time if it is requested, but prime minister Scott Morrison confirmed on Friday no such request had been received so far.
There has been much speculation as to whether the commission will recommend criminal prosecutions of bankers - but the answer to that question will not be revealed until the final report is released early next year.
Deputy Labor leader Tanya Plibersek criticised the government for resisting pressure to call a Royal Commission for years, given the scale of wrongdoing that was finally exposed.
She said there might have been different outcomes if the government had made sure the regulators had "both the resources and the culture to pursue poor behaviour".
