The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, also known as the Banking Royal Commission and the Hayne Royal Commission, was a royal commission established on 14 December 2017 by the Australian government pursuant to the Royal Commissions Act 1902 to inquire into and report on misconduct in the banking, superannuation, and financial services industry. The establishment of the commission followed revelations in the media of a culture of greed within several Australian financial institutions. A subsequent parliamentary inquiry recommended a royal commission, noting the lack of regulatory intervention by the relevant government authorities, and later revelations that financial institutions were involved in money laundering for drug syndicates, turned a blind eye to terrorism financing, and ignored statutory reporting responsibilities and impropriety in foreign exchange trading.
The Honourable Kenneth Madison Hayne , the former Justice of the High Court of Australia, served as the sole commissioner and submitted an interim report to the Governor-General of Australia on 28 September 2018, which was tabled in parliament by the Government on the same day. The Royal Commission conducted seven rounds of public hearings over 68 days, called more than 130 witnesses and reviewed over 10,000 public submissions. Commissioner Hayne submitted a final report to the Governor-General on 1 February 2019 with 76 separate recommendations. The final report and the government's response to the report were made public on 4 February 2019.
Background In 2008, a whistleblower went to ASIC to report a coverup in the Commonwealth Bank of Australia for a former financial planner.
Michelle Grattan characterised the then-incoming Abbott Liberal-National government as being "determined to weaken protections" that Labor had introduced, although she noted these attempts were defeated by the Senate crossbench.
In light of an account fraud scandal at US-bank Wells Fargo, on 5 May 2014 ABC TV Four Corners, in conjunction with Fairfax journalists, broadcast an exposé of a sales-driven culture within the Commonwealth Bank's (CBA) financial planning division, that was described as profit at all cost. Chaired by Labor Senator Mark Bishop, a subsequent Senate committee inquiry recommended a royal commission into the fraud scandal that left thousands of CBA customers millions of dollars out of pocket. The committee reported on the performance of the Australian Securities and Investments Commission (ASIC). Several days later, CBA chief executive Ian Narev apologised unreservedly to customers who lost money in the bank's financial planning scandal. Treasurer at the time, Joe Hockey, whose mother was impacted by the scandal, stated that the bank did not act quickly enough to address the problem. The CBA was subsequently embroiled in other matters including money laundering for drug syndicates, turning a blind eye to terrorism financing, ignoring statutory reporting responsibilities for more than three years on more than 750,000 accounts, and impropriety in foreign exchange trading.
The National Australia Bank (NAB) was implicated during 2015 in a series of scandals concerning financial planners where it was revealed that the NAB quietly paid millions of dollars in compensation to hundreds of clients for what it considered was inappropriate financial planning advice by its staff between 2009 and 2015. A whistleblower claimed that there was a volatile, toxic and Machiavellian culture within NAB. ASIC banned NAB staff who were previously licensed to provide financial advice. Subsequently, it was revealed that NAB were also implicated in impropriety in foreign exchange trading.
, Westpac was implicated in allegations that it rigged one of Australia's key interest rates, the bank bill swap rate and was sued under responsible lending laws for using an automated process to decide whether peoples' home loan applications met lending criteria. Further, a Westpac banker was imprisoned for fraudulently lending millions of dollars to elderly pensioners. Following ASIC investigations, Westpac was instructed to make a donation of $3 million to Financial Literacy Australia after ASIC found that the bank's employees disclosed confidential details of their clients' orders to other foreign exchange traders. Westpac refunded $65 million to 220,000 customers after it failed to pass on benefits they should have received under package deals, including home loans, credit cards and transaction accounts, offered by the bank.
The ANZ Bank (ANZ) was also implicated in the bank bill swap rate scandal and settled with ASIC prior to the commencement of legal proceedings.
Macquarie Bank was implicated in the foreign exchange trading scandal and was instructed to donate $2 million to charity and to open up its foreign exchange arm to scrutiny after ASIC uncovered a series of breaches by its traders.
Appearing before the House of Representatives Standing Committee on Economics, chief executives of the ANZ, CBA, NAB, and Westpac advised that, despite consumer complaints, very few senior bank staff were dismissed due to misconduct; despite supervising more junior staff who had been dismissed.
In June 2015, Greens senator Peter Whish-Wilson put forward a motion for the Abbott government to hold a royal commission into misconduct in the financial services industry. The motion was voted down in the Senate 39–14, with Labor and the government opposing it.
In a 2016 speech before the National Press Club, opposition leader Bill Shorten outlined his plans for a royal commission into the banking sector, should Labor win government at the 2016 federal election. Meanwhile, Liberals Warren Entsch also supported calls for a royal commission; as well as CBA whistleblower, Jeff Morris, who, for eight years, since 2008, documented the industry's "systemic bad behaviour".
Despite an attempt launched in April 2016 to protect consumer interests, increase transparency and accountability, and build trust and confidence in banks, amidst growing community concerns, in January 2017 twenty-five members of the Australian Banking Association launched Better Banking, an initiative intended to provide improved products, services and culture, and to provide consumers with helpful information and resources. In April 2016 Steve Sedgwick , a former senior Australian public servant, was commissioned to conduct a review into bankers' pay and commissions; and recommended the termination of bonus payments to retail bank employees that are linked to sales performance. In March 2017 ASIC handed down a report on financial advice compliance in the sector; and in September 2017 the Turnbull government introduced legislation to establish the Australian Financial Complaints Authority, an external dispute resolution body aimed to simplify how customers resolve complaints with bank and other financial services organisations.
Over the preceding years, there had been widespread criticism of ASIC's activities as a regulatory body, including its supervision of banks.
In late 2017, as a backlash against the legalisation of same sex marriage, the Nationals threatened to introduce a private member's bill calling for a commission of inquiry into the banking system. It was reported that the bill would be co-sponsored by the Nationals, Labor, the Greens and Senate crossbench parties. Nationals Senator Barry O'Sullivan, and LNP MPs George Christensen and Llew O'Brien, together with the Greens, Labor, and Senate crossbench parties, had enough numbers to force the Turnbull government's opposition to a royal commission.
In the 2017 federal budget, the Turnbull government proposed the introduction of a bank tax (or levy) that applied to banks with liabilities of at least $100 billion. The levy came into effect on 1 July 2017.Turnbull Government’s $6.2b big bank levy passes Parliament
With political pressure mounting, on 30 November 2017 Turnbull and his Treasurer, Scott Morrison, announced plans for a royal commission. The royal commission was established on 14 December 2017.
Terms of reference On 14 December 2017, the Governor-General Sir Peter Cosgrove issued Commonwealth letters patent appointing the commissioner and the commission's terms of reference. The commissioner was directed "to inquire into and report on misconduct in the banking, superannuation and financial services industry." It was due to table its final report on 1 February 2019, which had been noted to be not long before the 2019 Australian federal election.
Response The creation of the Royal Commission was supported by the Opposition leader, Bill Shorten; however, opposition treasury spokesperson, Chris Bowen, stated that Labor disagreed with the terms of reference and wanted the Government to consult with consumer groups and those impacted by financial scandals. Meanwhile, the Greens sought to widen the commission's terms of reference. The Australian Banking Association, and some of its members, who initially opposed calls for a royal commission, supported the terms of reference; however the Association's CEO, Anna Bligh warned that the commission could push up interest rates.
As revelations of misconduct came to light during the hearings, political pressure was exerted on the Turnbull government, due to beliefs that it had delayed the establishment of the Royal Commission; and Mathias Cormann, the Finance Minister, indicated that if Commissioner Hayne sought more time to extend the life of the Royal Commission, the government would respond positively.
Commissioner and executive
On 1 December 2017 Turnbull announced the appointment of Kenneth Hayne as the sole commissioner for the royal commission.
Commissioner Hayne subsequently announced that he would be assisted by legal counsel including Rowena Orr KC, Michael Hodge, Albert Dinelli, Eloise Dias, and Mark Costello.
Powers
The powers of Royal Commissions in Australia are set out in the enabling legislation, the Royal Commissions Act 1902.
Royal Commissions, appointed pursuant to the Royal Commissions Act or otherwise, have powers to issue a summons to a person to appear before the Commission at a hearing to give evidence or to produce documents specified in the summons; require witnesses to take an oath or give an affirmation; and require a person to deliver documents to the Commission at a specified place and time. A person served with a summons or a notice to produce documents must comply with that requirement, or face prosecution for an offence. The penalty for conviction upon such an offence is two years imprisonment. A Royal Commission may authorise the Australian Federal Police to execute search warrants.
Submissions The Commission invited individuals or entities to make public submissions using an online form, with provision for those who require further assistance via email or telephone. The purpose of the submissions was to identify the nature of alleged misconduct, the factors that led to the misconduct occurring, and the steps taken to resolve the complaint and the outcomes of the complaint. The role of the commission was not to resolve individual complaints, yet to come to an understanding of the systematic failures that may have led to the complaint occurring.
The Royal Commission conducted seven rounds of public hearings over 68 days, called more than 130 witnesses and reviewed over 10,000 public submissions of which the leading matters related to personal finance, superannuation, and small business finance.
The commissioner identified a number of themes, as follows: Some Features of the Australian Banking Industry: Background Paper Some Features of the Australian Mortgage Broking Industry: Background Paper Some Features of Car Financing in Australia: Background Paper