Date posted: 8/10/2018 8 min read

Banking Royal Commission Interim Report released

Have your say on the Interim Report of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry

in Brief

  • Commissioner Hayne released the Banking Royal Commission Interim Report on 28 September 2018
  • The report covers the policy issues identified in the first four rounds of hearings
  • Chartered Accountants invites member feedback for our submission by 19 October

Report overview

Commissioner Hayne’s Interim Report on the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released on 28 September 2018.

The Interim Report covers the policy issues arising in the first four rounds of hearings on consumer lending, financial advice, loans to small and medium enterprises, and issues affecting Australians who live in remote and regional communities.

Hayne makes observations about the conduct examined, and questions why it happened and what can be done to prevent it happening again.

According to Hayne, too often behaviour was motivated by greed – the pursuit of short term profit at the expense of basic standards of honesty. And too often selling became the sole focus of attention - with remuneration practices and policies focused on rewarding sales and profit.

When misconduct was revealed, Hayne says that it either went unpunished by the regulators or the consequences did not meet the seriousness of what had been done.

The Interim Report raises important questions about whether the existing law should be administered or enforced differently to prevent misconduct. Hayne proposes simplification of the law and more effective enforcement, in preference to additional laws and regulations.

The Commission’s Terms of Reference only require that Hayne inquire into whether any conduct by financial services entities “might” have amounted to misconduct and fallen short of community standards and expectations.

For this reason, the conclusions reached in the Interim Report are not expressed as breaches of the law, but rather as findings that in some cases the conduct identified “may” have breached the law and the Code of Banking Practice, and fallen below community standards and expectations.

Issues identified

The key issues that emerged in connection with the first four rounds of hearings are:

Consumer lending
  • intermediaries and confusion of roles
  • communication with customers, and
  • responsible lending.

Financial advice
  • culture and incentives
  • conflicts of interest and duty and confusion of roles, and
  • Regulator effectiveness.

Small and medium enterprises
  • the legal framework governing SME lending
  • the content of Code of Banking Practice obligations
  • third party guarantors, and
  • dispute resolution

Agricultural lending
  • revaluation of securities
  • difficulties in obtaining access to banking services and appropriate support
  • changes to conditions of lending, and
  • enforcement by appointment of external administrators.

Remote communities
  • banking services access, account fees, and the application of standard identification requirements
  • funeral insurance regulation and predatory behaviour by insurers and salespeople, and
  • culturally appropriate communication

Regulation and the regulators
  • Complexity of the law and regulations governing financial services entities and their conduct
  • Sufficiency of responses by entities to the conduct identified
  • Appropriateness of the responses of regulators ASIC and APRA to the conduct identified

Questions raised

Hayne asks what were the causes of the conduct identified and criticised in the report:

  • Conflict of interest and duty?
  • Remuneration structures?
  • Culture and governance?
  • Regulatory response?

He questions what responses should be made to the conduct identified and criticised in the report:

  • Should the financial services law be simplified?
  • Should carve outs and exceptions to the conflicted remuneration provisions, such as grandfathered commissions, be reduced or eliminated? If so, how far should they be changed and when?
  • Is the law governing financial services entities and their conduct too complex? If so, to what extent does it impede effective conduct risk management and regulatory enforcement?
  • How should entities manage conduct and compliance risks?
  • How should APRA and ASIC respond to conduct and compliance risk?
  • Are ASIC’s enforcement practices and priorities satisfactory? Are APRA’s regulatory and enforcement practices satisfactory? If not, how should they be changed?
  • Is regulatory reform required? If so, what regulations should be changed, improved or removed?
  • Should all financial advisers (including those who now act as an authorised representative of an advice licensee), be licensed by ASIC?
  • What is the proper place for industry codes of conduct?
  • How far can, and how far should, there be a separation between providing financial advice and manufacture and sale of financial products?
  • Should an intermediary be permitted to recommend, provide personal financial advice or sell to a consumer any financial product manufactured by an entity (or a related party of the entity) of which the intermediary is an employee or authorised representative?
  • Is structural change in the industry necessary?


The Interim Report may have far reaching implications for individuals, entities and regulators.

Chartered Accountants will make a submission on the Interim Report by Friday 26 October, to ensure that members' voices are heard and considered in the Commission’s final report.

To assist us in preparing our submission and advocating on your behalf, we encourage members to send us your feedback to, as early as possible prior to Friday 19 October.

Please respond to the policy issues and questions arising detailed in Chapter 10 of the Interim Report and summarised in this article.

The Commission’s final report, which is due to be handed down in February next year, will address additional issues on superannuation and insurance, as well as the policy issues identified in the first six rounds of hearings.

Interim Report

Banking Royal Commission Interim Report released on 28 September

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Have your say

Members are encouraged to provide feedback for our submission by 19 October

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