The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has slammed the industry regulators for failing to sufficiently punish wrongdoers for harm done to consumers, when they did in fact punish them at all.
Commissioner Kenneth Hayne found that when misconduct was revealed, it either went unpunished or the consequences wrought were not proportionate to the level of harm done. This echoed concerns on the strength of regulatory punishment voiced by victims of the industry’s misconduct for years, some of whom testified before the Commission.
“Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC [Australian Securities and Investments Commission] of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct,” Hayne wrote.
The Commissioner noted that the conduct regulator, ASIC, rarely took matters to court and the prudential regulator, the Australian Prudential Regulation Authority (APRA), never did.
“Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that ASIC could properly have asked a court to impose,” Hayne continued.
Rather than suggesting a slew of recommended new laws, as many in the industry feared the Commission would, Hayne noted that much of the misconduct uncovered was already contrary to existing law.
“The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’,” Hayne wrote. “Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain?”
He said that a further round of public hearings would consider, amongst other questions, whether the law needed simplifying to better reflect whether the above standards should be simplified or administered or enforced differently.