The banking industry has candidly admitted the damning findings in the financial services commission’s interim report are a “day of shame” for financial institutions.
Royal commissioner Kenneth Hayne’s blistering report published Friday blamed a culture of greed and institutions putting short-term profits before people for endemic customer rip offs across banks, financial planners, insurers and superannuation funds.
He also blamed the corporate regulator for being too soft on the financial sector and suggested it better enforce existing laws.
Australian Banking Association chief executive Anna Bligh said the report’s findings were “shocking” and that banks must work hard to win back the trust of the community.
“Our banks have failed in many ways. Failed customers, failed to obey the law and failed to meet community standards,” she said at a press conference in Sydney.
“Too many customers have been hurt and it has to stop.”
“Make no mistake. Today is a day of shame for Australia’s banks.”
Despite the mea culpa and scathing assessment in Mr Hayne’s near-1000 page report, the share prices of the big banks rallied.
The report did not make firm recommendations, instead asking a series of questions about enforcing the law better and whether the rules should be simplified.
ANZ chief executive Shayne Elliott said: “This is a critical moment for the industry, our bank and our people to continue the urgent work required to fix the significant failures highlighted by the Commission. We accept responsibility and we are determined to improve.”
Commonwealth Bank of Australia chief Matt Comyn said the interim report was “confronting”.
“We have seen too many examples of unacceptable behaviour and unacceptable customer outcomes,” he said in a statement.
“The commission has highlighted the need for significant changes, particularly to systems, processes and culture. 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.”
“We will provide a comprehensive response to the Interim Report.”
National Australia Bank chief executive Andrew Thorburn said he had read a summary of the report and would review it in more detail over the weekend.
“For us at NAB, where we have made mistakes or done the wrong thing, we will own them and fix them. It is difficult to face the statement of ‘profits before people’, but this is exactly what we need to confront. 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.”
The Consumer Action Law Centre and Financial Rights Legal Centre said in a joint statement it was clear the finance sector can’t be trusted to self-regulate.
“The lack of consequences for banks and lenders for misconduct is driving poor lending and sales practices that are hurting Australians who can least afford it. Where loans are found to be irresponsibly lent, debts should be waived—this will provide the right incentive for banks to do the right thing,” said Consumer Action Law Centre Gerard Brody.
“The government must act to fix our broken banks and properly resource our regulators so that they can hold the industry to account for misconduct.”
Financial Sector Union national secretary Julia Angrisano said the commission’s hearings had revealed appalling stories of corporate greed and a disturbing lack of compassion for customers. She called for better governance, regulation and culture.
“The FSU’s members are in a similar position as the exploited customer because the senior management of the banks extend extraordinary pressure down through layers of middle management to push front-line staff and call centre workers to meet sales targets,” Ms Angrisano said.
“And while the banks have given numerous assurances that heavy handed sales targets are being phased out, bank workers are still being pushed to sell products to customers who don’t need them and can’t afford them.
The profits of financial institutions are already being hurt by the commission. They are spending hundreds of millions of dollars on lawyers and compensating customers.
Westpac on Thursday announced its cash earnings would be cut by $235 million, or about 3 per cent of earnings per share, as it undertakes further work to address customer issues and provisions for litigation. The increase in provisions were for financial planning fee-for-no-advice violations and refunds for inadequate financial advice
UBS bank analysts say more provisions by banks are likely.