Graeme Samuel, who will spearhead a root and branch review of the prudential regulator, has set a challenge for the banks.
He wants them all to sign up to a banking code, enforceable by the corporate cop, where they agree to conduct their business in accordance with the recommendations set out in the final report into the royal commission.
“Why wait up to two years for changes when they can do it today?” he said.
It is a good point that could be applied to more than just the banks, particularly given Commissioner Kenneth Hayne’s report was released ahead of a federal election with only five Senate sitting days remaining.
In other words, most of those recommendations are unlikely to see any form of light until after the next election.
For victims of misconduct, it means a proposed compensation scheme of last resort will have to wait. It means the removal of grandfathered commissions will have to wait, so to much-needed reform of superannuation trustees and so on.
There is a reason community trust in our banks has been badly broken and there are no easy fixes for the mess.
So a gesture, as suggested by Samuel, to do something proactively couldn’t hurt, particularly given Hayne let the sector off lightly.
Any doubts the final report released on Monday was light on recommendations, was demonstrated in spades by investors who rallied behind the stocks, adding more than $19 billion to the combined market values of the big four banks, AMP and IOOF.
UBS referred to the report as the “tough talk, soft recommendations,” given expectations from the interim report that he would do something more radical than his eventual 76 recommendations.
Many of the bank and financial services lobby groups said they “welcomed” the recommendations, which is a general indicator it didn’t go far enough.
It was a far cry from the “shock treatment” described by former prime minister Malcolm Turnbull and what many had hoped was coming.
In a nutshell Hayne took a leap of faith that the banks will sort themselves out and clean up their act. He based this largely on their testimony in the final two weeks of hearings as well as moves by some of the banks to get out of life insurance or advice.
NAB was his big exception, which he singled out for more public shaming, saying he feared “there may be a wide gap between the public face NAB seeks to show and what it does in practice".
It prompted NAB chief executive Andrew Thorburn and chairman Ken Henry to go on the front foot and issue a press statement saying they were "disappointed" the former High Court judge believed NAB – or themselves - had not learned lessons from past misconduct.
Thorburn then took to the airwaves trying to mend fences. Whether it is enough to save their jobs is in the laps of the investors.
But it got a lot of tongues wagging about the performance of some other chief executives who gave testimony which also had a gap between what they said and what they are doing.
Hayne also took a leap of faith with the Australian Securities and Investments Commission (ASIC), which he recommended should have more powers which would make it lead conduct regulator.
Perhaps Hayne was convinced by ASIC chairman James Shipton’s public statements that he would pivot ASIC to become more strategic and litigate more often.
Maybe it was Shipton’s pledge to dust off a capability review conducted into ASIC in 2015 by a panel spearheaded by Karen Chester, who recently joined ASIC as deputy chair.
What is known is that Shipton provided Hayne with a copy of an internal enforcement review that had been conducted into ASIC’s enforcement policies and procedures in October.
Hayne read that report as he was writing his final report into the royal commission. Whatever was in its contents played a role in giving ASIC another chance. Not only that but he gave it more powers over super, industry codes of conduct and recommended it co-regulate some areas with APRA.
APRA, in contrast, he recommended should be subjected to a capability review, to essentially put a bomb under it.
But if all else fails, buried on page 431, he recommends a nuclear option: if ASIC fails to enforce the laws within its remit then further consideration should be given to developing a specialist litigation agency.
He doesn’t make any recommendations about what exactly we should do if financial institutions fail to change their ways. Maybe we are just supposed to wait?
By Adele Ferguson - comments on companies, markets and the economy.
The Sydney Morning Herald
6 February 2019