A year-long inquiry that exposed widespread wrongdoing in Australia’s financial industry ended on Friday ahead of a final report due by Feb. 1 that could reshape the sector.
Dismissed initially as a “populist whinge” by the ruling conservative party, the quasi-judicial Royal Commission has revealed branch-to-boardroom misconduct which has smashed bank share prices as investors brace for tougher regulation.
In 69 days of hearings since February, the inquiry heard shocking tales of rip-offs, callous mistreatment of customers, deception of regulators and even taking money from the dead.
In its final two weeks it grilled the CEOs of Australia’s biggest banks and wealth managers, exploring questions around remuneration, governance, culture, the conflicting interests of shareholders and customers, and the regulatory structure of the industry.
The final report from Commissioner Kenneth Hayne, a former High Court justice leading the inquiry, will contain recommendations for how to clean up the industry. It could also recommend civil or criminal charges against individuals.
The inquiry’s revelations have already wiped about A$40 billion ($29 billion) from the market value of wealth manager AMP Ltd <AMP.AX> and Australia’s four largest banks – Commonwealth Bank <CBA.AX>, Westpac Banking Corp <WBC.AX>, Australia and New Zealand Banking Group <ANZ.AX> and National Australia Bank <NAB.AX>.
Some analysts expect further share price falls in response to Hayne’s recommendations in February, which are likely to lead to stricter oversight and a greater burden of compliance that could narrow profit margins across the industry.
Banks have pre-empted some recommendations by cracking down on loose consumer lending practices, cutting executive bonuses, exiting non-core wealth management businesses and ending some commission payments that created conflicts of interest.
Australia’s top financial regulators have moved too, vowing to adopt a more litigious stance and change their reputation of being too soft on the companies they are meant to police.