Banking Royal Commission - Interim Report. What drives individual behaviour?


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“The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission) released its much-anticipated Interim Report on 28 September 2018.  The Interim Report dealt with issues considered in the first four rounds of public hearings – being consumer lending practices, financial advice, small and medium enterprises, and issues affecting remote and regional communities.

The Interim Report is set out in 3 volumes.  The two key questions that have been addressed are firstly, why did the conduct happen, and secondly, what can be done to prevent the conduct happening again.  It is well worth a read.

It seems that in addressing the question why did the conduct happen, Commissioner Hayne suggests that the answer is greed -  the pursuit of short term profit and/or financial gain at the expense of consumers and basic standards of honesty.

I don't necessarily agree with the proposition that greed alone drives this behaviour.   I certainly accept that greed plays a part, but I don't accept that it is the main driving force behind the unacceptable conduct uncovered by the Royal Commission.  I am minded to think that the matters of organisational culture, competition, conflict of interest (on several levels), individual personality types and the day-to-day operation of banks and financial institutions need to be more closely examined when considering the driver of behaviours.  I am working on developing this thinking in collaboration with Professor Sally Wheeler, and we look forward to publishing academic literature in this space soon.

There can be no doubt that the level of wrongdoing and morally skewed behaviour uncovered by the Royal Commission is unsavoury and reprehensible, in some cases.  Financial institutions who have, for example, charged fees for no service, who have provided inappropriate financial advice and who have fostered improper conduct by their financial advisers, must be held to account (and cannot be able to continue in this manner).  Of course, this in turn raises the matter of the effectiveness of the regulators, and begs the question What have APRA and ASIC been doing?  There is not a simple answer to this just yet.

What’s next?

Submissions on the Interim Report can be made until 26 October 2018.  Any questions that arise from those submissions will be addressed in a further round of public hearings which will take place from 19 to 23 November 2018 in Sydney, and from 26 to 30 November 2018 in Melbourne.  These matters will then be addressed in the Royal Commissions Final Report which is expected to be delivered by 1 February 2019.”

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Tracey Mylecharane - Solicitor

Tracey Mylecharane has more than 12 years experience in legal practice and has been involved in numerous matters with clients who have experienced hardship and difficulty with their banks - this has ranged from simple advice and guidance, to assistance lodging complaints through the ombudsman system, to representing clients in court against banks.