Author: Lauren Osbich

Passing laws cannot instill good corporate culture and governance in an organisation, according to Commissioner Hayne. Culture and governance are “affected by rules, systems and practices, but in the end they depend upon people applying the right standards and doing their jobs properly.

The Interim Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) focused its first public round of hearings on consumer lending. The Royal Commission did this for two reasons. Firstly, because consumer lending affects both consumers and financial service entities equally and secondly, because the kinds of dealings which were being raised in connection with the public hearings all indicated conduct falling below community standards and expectations.

The Interim Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) has brought both condemnation of, and drawn public attention to, the conduct displayed by financial entities. The reason for this conduct seems to be the pursuit of short-term profit at the expense of basic standards of honesty. But, as we discuss below, conflicted remuneration is not a simple matter of greed. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales rather than the best interests of their clients.

The Interim Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Interim Report) has provided a damning assessment of the financial services industry. Commissioner Hayne summed it up with the following comment: “Too often, entities have been treated in ways that would allow them to think that they, not ASIC, not the Parliament, not the courts, will decide when and how the law will be obeyed or the consequences of breach remedied.” The Royal Commission has made it clear that this is untenable and will need to change. But how far, when and what the consequences of the questions posed in the Interim Report will be is what is now uncertain.