Australian banks slammed in Royal Commission interim report

Australia's financial sector was slammed on Friday for putting greed before the “basic standards of decency”, as a government inquiry into misconduct published its interim report.

Regulators were also castigated by the banking royal commissioner Kenneth Hayne for failing to take action over impropriety.

“Banks, and all financial services entities recognised that they sold services and products. Selling became their focus of attention. Too often it became the sole focus of attention,” Hayne said as he published his three-volume, 1,000 page report.

“Banks searched for their ‘share of the customer’s wallet’. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales.”

Hayne said the regulators, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority, had failed to punish banks hard enough, or taken no action at all.

He said ASIC “rarely went to court to seek public denunciation of and punishment for misconduct”, while APRA, “never went to court”.

“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done.”

Infringement notices “imposed penalties that were immaterial for the large banks” and community benefit undertakings associated with enforceable undertakings were paltry compared with penalties courts would have imposed.

The inquiry heard cases of dead people being charged life insurance premiums, a woman with cancer who had her payouts cancelled with no warning, and a young man with Down's syndrome who was sold life insurance using cold calling tactics and extracting his debit card details.

Provider AMP admitted to charging $1.3m in premiums for life insurance to more than 4,600 superannuation customers it knew had died, and admitted the number of cases could be higher. The premiums have not been refunded

Commonwealth Bank also admitted its own financial advisers had been charging dead clients for financial advice.

Hayne suggested that new laws to govern conduct would “add an extra layer of legal complexity to an already complex regulatory regime”.

“What would that gain?” he said.

“The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’. Much more often than not, the conduct now condemned was contrary to law.”

The Australian Banking Association said the report's findings marked a “day of shame for Australia’s banks”.

“Having lost the trust of the Australian people, we must now do whatever it takes to earn that trust back,” said chief executive Anna Bligh said in a frank assessment.

“Banks accept full responsibility for their failures and right now, in every bank, people are working day and night to make things right for their customers.”

National Australia Bank chief executive, Andrew Thorburn, said his organisation needed to confront the charges laid out in the report.

“Banking was built on putting people first and earning the trust of customers. We must return to these principles once again, rather than continuing to be short term managers,” he said in a statement.

Commonwealth Bank of Australia chief executive Matt Comyn said the interim report was “confronting and rightly critical of our industry and our bank”.

“I am committed to making sure that we learn from the failures detailed in this report to fix what went wrong and put things right for our customers.”