Banking Royal Commission Aftermath: A Revolution Is Coming

Opinion: Canstar Group Executive of Financial Services, Steve Mickenbecker

If you wanted to see a banker bloodbath, the royal commissioner’s final report would have disappointed you. It is not a report of grand gestures, but a “roll your sleeves up” report that deals with the issues in a practical manner.

The royal commission made crystal clear during the course of hearings that it considered the behaviours exposed to be reprehensible. Its moral outrage was there for all to see and it led public opinion. Even those who originally had felt the royal commission to be unnecessary, were shocked at the degree and ubiquity of the malpractice.  Who would have expected fees for no service to have become industry practice?

Now the time for shock horror is behind us and rhetoric will not fix the mess.  The remedy is in a series of 76 actions intended to set standards, remove conflicts, establish accountability, enforce and penalise. In taking this approach the royal commission has got it right. It has put the industry through the pain and now it is has recommended specific reforms that require the minimum of interpretation and that the industry can get moving on right now. There has been a minimum of public resistance from the banks, which might have been different had the report been written with more pathos.  How can the banks resist change from here?

National Australia Bank CEO Andrew Thorburn and Chairman Dr Ken Henry today advised they would leave the bank. Market Release here: https://t.co/zOI1QTcg5P

— NAB (@NAB) February 7, 2019

As for the content, it is hard to argue over it. It has set standards and cleared away conflicts. It has done this without overcooking the recommendations, as could have happened if further tightening of credit standards had been demanded.

Yes, you could argue some specifics. There is unlikely to be broad consumer preparedness to pay mortgage brokers fees, which will likely mean many brokers leaving the market and smaller lenders who have been offering competitive rates losing their distribution channel. It’s worth remembering more competition, not less, is the recipe for customer interest first.

The Commissioner might also eventually regret the pragmatic call not to enforce separation of advice from product manufacture.  The removal of conflicted commissions will go some way to getting the customer to the top of the pecking order, but the integrated corporate structure will remain persuasive and potentially in conflict.  Mitigating this, the royal commission has put the spotlight on customer interests, and I would have thought the continuing integrated businesses might consider themselves to be on a last warning.

So, where to from here as the royal commission hands the baton over to the politicians? There is broad agreement which should ease legislative passage, even though the opposition is attempting to differentiate its position.

Then it will be over to the banks. Implementation is already underway in some areas and the clarity of recommendations leaves them little wriggle room. The process has been such that the case for cultural revolution is irrefutable.  The rewards will be there for those who move quickly with the reforms and remediation.

The totality of the royal commission process has led the industry to the obvious point that must always have been Commissioner Haynes’ vision.  

Resistance is futile.  

Main image Source: oatawa (Shutterstock)