Banking Royal Commission – Interim Report

On 28 September 2018, Commissioner Hayne released his Interim Report covering the first four rounds of hearings on consumer lending, financial advice, lending to SMEs and issues affecting regional and remote Australians.

The Commissioner’s central views are directed towards:

  • short term financial gains at the expense of customer’s interests and basic standards of honesty
  • lack of adequate governance and risk management within organisations
  • behaviour and overall culture that amounts to misconduct or falls below community standards and expectations

The Commissioner was also critical of ASIC and APRA in failing to monitor market conduct and appropriate standards, and wield its (albeit limited) enforcement powers, which in turn, failed to deter and punish wrongdoing. However, it was noted that this criticism should not be taken as lessening each entity’s and individual’s own responsibility to behave correctly and lawfully.


Commissioner Hayne articulated a preference to simplify the legal framework governing the industry and not increase regulation, which in his view, would stifle compliance and instead encourage a mere ‘tick box’ approach.

To that end, some issues that were highlighted:

  • Appropriateness of remuneration structures and incentives towards sales and profits, including for senior executives and managers
  • Adequacy of governance and risk management practices
  • Proactive enforcement by regulators including commencing litigation and publicising investigations, instead of preferring negotiated outcomes eg. enforceable undertakings, infringement notices or issuing apologies
  • Inadequate monetary penalties relative to the gains from misconduct

The basic principles which should guide overall behaviour and responsible lending include:

  • Obey the law
  • Do not mislead or deceive
  • Be fair
  • Provide products and services that are fit for purpose
  • Act with reasonable care and skill
  • When acting on behalf of others, act in their best interest

Next Steps

Public submissions in relation to the Interim Report may be submitted until 26 October 2018. Further rounds of hearings will take place until 30 November 2018. The final report is to be submitted to the Governor-General by 1 February 2019.

Our View

We anticipate that the publicity surrounding the Royal Commission and its ultimate findings will go some way to change behaviour in the banking and financial services industry, and while the case studies have mostly focused on the conduct of the larger entities, we expect that community attitudes and expectations of suitable behaviour will also apply to all other players along the financial spectrum.

If you would like to discuss how the Royal Commission impacts your business, contact our lawyers below.

We want to help you succeed, so have put this together so you know what’s what. But, let’s be frank, it’s not legal advice so please reach out to us if you have questions or would like to chat to us further about how these changes affect your circumstances.

Kenneth Pang

Senior Legal Counsel, Sydney

1800 875 735 | +61 (0) 434 363 424 |

Emma Yim

Head of Corporate & Commercial, Sydney

1800 875 735 | +61 (0) 411 095 985 |

Graham Anderson

Principal, Melbourne

1800 875 735 | 0405 904 622 |