As a 700-word coda to the first volume of his interim report, royal commissioner Kenneth Hayne reminded bankers and readers "many questions … can be distilled and organised in three categories." There are 50 of them.
Leaving out quote marks and with light edits, Hayne summarised the three categories as:
• issues;
• causes; and
• responses.
IssuesThe issues can be divided into four groups.
First, there are issues about access to banking services. Second, there is a group of issues about the roles and responsibilities of intermediaries - those who stand between the purchaser of a financial service and the provider of that service. Third is a group of issues about responsible lending. And fourth, there is a group of issues about regulation and the regulators.
The issues intersect and overlap in different ways. Putting the issues in groups should not be allowed to diminish the importance of identifying and responding to those intersections and overlaps.
AccessDo all Australians have adequate and appropriate access to banking services?
IntermediariesFor whom do the different kinds of intermediary act?
- mortgage brokers
- mortgage aggregators
- introducers
- financial advisers
- authorised representatives of Licensees
- point of sale sellers of loans.
For whom should each kind of intermediary act?
If intermediaries act for the consumer of a financial service:
- what duty do they now owe the consumer?
- what duty should they owe?
Who is responsible for each kind of intermediary's defaults?
Who should be responsible?
How should intermediaries be remunerated?
Are external dispute resolution mechanisms satisfactory?
Should there be a mechanism for compensation of last resort?
Responsible lending• Consumers:
- Should the test to be applied by the lender remain 'not unsuitable'?
- How should the lender assess suitability?
- Should there be some different rule for some home loans?
• Should the NCCP Act apply to any business lending? In particular,
should any of its provisions apply to:
- SMEs?
- agricultural businesses?
- some guarantors of some business loans?
• To what business lending should the Banking Code of Practice apply? Is the definition of 'small business' satisfactory?
• Should lenders adopt different practices or procedures with respect to
agricultural lending?
• Are there classes of persons from whom lenders
- should not take guarantees; or
- should not take guarantees unless the person is given particular information or meets certain conditions?
• How should lenders manage exit from a loan
- at the end of the loan's term;
- if the borrower is in default?
Regulation and the regulators• Have entities responded sufficiently to the conduct identified and
criticised in this report?
• Has ASIC's response to misconduct been appropriate? If not, why not? And how can recurrence of inappropriate responses be prevented?
• Has APRA's response to misconduct been appropriate? If not, why not? And how can recurrence of inappropriate responses be prevented?
CausesWhat were the causes of the conduct identified and criticised in this report?
• Conflict of interest and duty?
• Remuneration structures?
• Culture and governance?
• Regulatory response?
Responses What responses should be made to the conduct identified and criticised in
this report?
• Are changes in law necessary?
- Should the financial services law be simplified?
- Should carve outs and exceptions be reduced or eliminated?
In particular, should grandfathered commissions, point of sale exceptions to the NCCP Act, and/or funeral insurance exceptions be reduced or eliminated?
• How should entities manage conduct and compliance risks?
• How should APRA and ASIC respond to conduct and compliance risk?
• Should the regulatory architecture change?
- Are some tasks better detached from ASIC?
- Are some tasks better detached from APRA?
- What authority should take up any detached task?
- Should either or both of ASIC and APRA be subject to external review?
• What is the proper place for industry codes of conduct?
- Should industry codes of practice like the 2019 Banking Code of Practice be given legislative recognition and application?
• Should an intermediary be permitted to:
- recommend to a consumer;
- provide personal financial advice to a consumer; 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?