Date posted: 06/02/2019 6 min read

Banking Royal Commission Final Report Summary

Major reforms highlighted in culture, governance and remuneration structures in Australian Banking, Superannuation and Financial Services Industry

Key Points

  • Commissioner Hayne’s final report made 76 recommendations and 24 referrals for potentially criminal conduct
  • This article outlines the key questions, underlying principles and general rules which guided Commissioner Hayne’s response and summarises his major recommendations.

Commissioner Hayne’s final report on the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and the Government’s response, was publicly released on 4 February 2019.

The final report seeks to take what has been learned about each part of the financial services industry examined by the Commission and identify issues, causes, responses and recommendations.

The final report made 76 recommendations and 24 referrals for potentially criminal conduct, including three of the major banks. It represents an incredible opportunity for lasting change and will have substantial implications for the industry.

This article outlines the key questions and underlying principles which guided Commissioner Hayne’s response and summarises his major recommendations.

Key questions

Treasury’s written submission on the Commission’s Interim Report identified four key questions that “would form the pillars of any comprehensive policy response to what the Commission has publicly exposed”, which were accepted by Commissioner Hayne in the final report:

  1. To what extent can the law be simplified so that its intent is met, rather than merely its terms being complied with, and how can this be done?
  2. Should the approach to addressing conflicts of interest change from managing conflicts to removing them, either by banning all or some forms of conflicted remuneration and sales or profit-based remuneration and/or changing industry structures?
  3. What can be done to improve compliance with the law (and industry codes), and the effectiveness of the regulators, to deter misconduct and ensure that grave misconduct meets with proportionate consequences? and
  4. What more can be done to achieve effective leadership, good governance and appropriate culture within financial services firms so that firms ‘obey the law, do not mislead or deceive, are fair, provide fit for purpose service with care and skill, and act in the best interests of their clients’?

Underlying principles

Commissioner Hayne’s responses to the issues are informed by the underlying principles he identified in the Interim Report, which reflect six norms of conduct:

  • obey the law,
  • do not mislead or deceive,
  • act fairly,
  • provide services that are fit for purpose,
  • deliver services with reasonable care and skill, and
  • when acting for another, act in the best interests of that other.

Key recommendations

Commissioner Hayne’s key recommendations are summarised below:


  • Mortgage brokers must act in the best interests of the borrower, not the bank providing the loan. Breach of this duty would result in a civil penalty,
  • Lenders should be banned from paying trailing commissions to mortgage brokers for two to three years,
  • Mortgage brokers should be subject to the same laws that apply to financial advisers who provide personal advice, and
  • Expand the Banking Executive Accountability Regime laws to track those responsible for any breaches of lending laws.

Financial advice

  • All ongoing fee arrangements must be reviewed annually by the client,
  • Financial advisers who lack independence must, before providing personal advice to retail clients, disclose this to the client in writing,
  • Grandfathering commissions for conflicted remuneration should be repealed as soon as reasonably practicable,
  • ASIC should consider further reducing the cap on commissions in respect of life risk insurance products,
  • All remaining conflicted remuneration exemptions should be reviewed and consideration given to whether they remain justified, and
  • All financial advisers who provide personal advice to retail clients should be subject to a new, single disciplinary body, with all advisers required to be registered.


  • Trustees of a superannuation fund must not assume any obligations other than those related to performance of their duties,
  • Deduction of advice fees from MySuper accounts (other than for intra-fund advice) should be banned,
  • Advice fees for non-MySuper accounts (other than for intra-fund advice) should be prohibited unless certain requirements are met,
  • Hawking of superannuation products should be abolished,
  • Employees should only have one single default superannuation fund, and
  • Over time extend the Banking Executive Accountability Regime to all RSE licensees.


  • The hawking of insurance products should be prohibited,
  • The exclusion for the sale of funeral expenses policies should be removed,
  • ASIC should impose a cap on the amount of commission that can be paid to car dealers for the sale of add-on insurance products,
  • The unfair contract terms provisions in the ASIC Act should apply to insurance contracts, and
  • The claims handling exemption should be removed.

Culture, governance and remuneration

  • All financial services entities should review at least once a year the design and implementation of their remuneration systems for frontline staff,
  • All financial services entities should, as often as possible, review their own culture and its governance, identify and deal with any problems identified and determine whether the changes made have been effective,
  • APRA should have as one its aims for supervision of remuneration, the sound management by APRA-regulated institutions of not only financial risk but also misconduct, compliance and other non-financial risks.
  • APRA should set limits on the use of financial metrics in connection with long-term variable remuneration.


  • The ‘twin peaks’ model of financial regulation should be retained,
  • ASIC’s approach to enforcement should commence with consideration of whether a court should determine the consequences of a contravention,
  • ASIC should use infringement notices principally for administrative failings, it is rarely an appropriate enforcement tool where a large corporation is the infringing party,
  • ASIC should be given the power to enforce all provisions of the SIS Act that are, or will become, civil penalty provisions or otherwise give rise to a cause of action against an RSE licensee or director for conduct that may harm a consumer.
  • Establish a new oversight authority for APRA and ASIC, independent of government, to ensure they are carrying out their responsibilities.


  • Establish an industry-funded compensation scheme of last resort for those unable to obtain compensation from their financial institution.

Final report

Banking Royal Commission final report

Download the report

Government response

The Government’s response to Commissioner Hayne’s final report

Download the response