Widespread misconduct in Australian banking, finance sectors revealed by landmark report

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Widespread misconduct in Australia's banking and finance sectors was encouraged by a culture that prioritized profit over customers, a landmark report has found.

After 68 days of hearings the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was made public on Monday.

Commissioner Kenneth Hayne made 76 recommendations, which would compensate victims of financial misconduct, overhaul banking remuneration, encourage cultural change, better protect vulnerable customers and end the unlawful excessive charging of fees.

"There can be no doubt that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and their boards and their senior management," Hayne wrote.

"The conduct in issue was driven not only by the relevant entity's pursuit of profit, but also by individuals' pursuit of gain, whether in the form of remuneration for the individual or profit for the individual's business."

"Providing a service to customers was relegated to second place. Sales became all important," he added.

"Rewarding misconduct is wrong. Yet incentive, bonus and commission schemes throughout the financial services industry have measured sales and profit, but not compliance with the law and proper standards."

Responding to the report, Treasurer Josh Frydenberg promised that the government would adopt all of Hayne's recommendations "and in a number of important areas is going further," describing the report as a "scathing assessment of conduct driven by greed."

"The price paid by our community for this misconduct is immense," he told reporters in Canberra.

"There have been broken businesses and the emotional stress and personal pain has broken lives. This is why the community's trust in our financial institutions has been lost and this is why it must be restored," he said.

"My message to the financial sector is that misconduct must end and the interests of consumers must now come first. From today, the sector must change, and change forever."

The inquiry heard that Australia's big four banks and financial services giant AMP knowingly charged fees for services they never delivered and even charged fees to dead customers.

Speaking before the report was made public, Opposition Australian Labor Party (ALP) leader Bill Shorten sought to remind Australians that the governing Liberal-National Party coalition (LNP) voted against establishing the commission 26 times in parliament before caving in to pressure in November 2017.

"For the victims and consumers and people who believe in having an honest and ethical banking sector, we'll keep being in their corner and we'll make sure this government does not backslide on the banks," he told reporters.

"It's a day of reckoning for the banks and financial institutions who have abused the trust of literally thousands of their customers."

The commission heard from 134 witnesses and received more than 10,000 submissions but the ALP has criticized it as not hearing from enough victims, calling on the government to extend the commission; a notion that was repeatedly rejected by Prime Minister Scott Morrison.

Of the big four banks, Hayne reserved his harshest criticism for the National Australia Bank (NAB).

"NAB also stands apart from the other three major banks," he wrote.

"Having heard from both the chief executive officer (CEO) Andrew Thorburn, and the chair Dr Ken Henry, I am not as confident as I would wish to be that the lessons of the past have been learned.

"I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly."

He referred 24 cases of wrongdoing to authorities for "further action" which could include criminal and civil proceedings being launched against the institutions in question.

Ahead of the report's release, the Australian Banking Association (ABA) on Monday acknowledged the industry's substantial failures.

"Banks know they have failed their customers and not lived up to the high standards Australians rightly expect of the industry," CEO Anna Bligh said.

"We do know this an opportunity to reset the industry and to make things better for our customers."

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