13 February 2018

Updates from Day One – Banking Royal Commission

This article was written by Domenic Gatto, Matthew Spain and Jessica Terrill.

The initial public hearing of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Commission) was held On February 12.  The Commissioner, the Honourable Kenneth Madison Hayne AC QC spoke, followed by Ms Rowena Orr QC, Counsel Assisting.

Below are some of the key takeaways.

The Commission’s role and work to date

Following the inception of the Commission, the Commissioner has requested information and documents from various entities. Initial requests were sent on 15 December 2017 and a second wave of requests was sent to different entities in January 2018. Further requests arising out of any responses received by the Commissioner were sent on 2 February 2018, with responses due on 13 February 2018. In addition to the major institutions, responses have also been sought from regulators and bodies such as ASIC, APRA, the ACCC, the Financial Ombudsman Service Australia and the Credit and Investments Ombudsman. 

The Commission, who is assisted by the Australian Government Solicitor, has also been in consultation with a number of bodies. In particular, regulators and organisations that are engaged directly with Australians who, as a result of conduct of a financial entity, have experienced hardship. 

To date, the Commission has:

  • issued lists of questions to two waves of entities, and received responses from 48 first wave entities, regulators and other interested bodies; and

  • issued 32 notices to produce.

Other work to date includes reviewing responses to the Commissioner, reviewing past financial inquiries, engaging experts to assist and commissioning research papers.

Focuses of the Commission

The public submissions

Submissions received from the public have already identified themes. Approximately 84% of the submissions received relate to misconduct or practices that fall below community standards and expectations, whilst 40% relate to culture and governance and 35% relate to the effectiveness of redress to consumers. Most of the submissions received relate to the banking industry, and in particular, to personal finance.







General insurance 


Life and TPD insurance


Types of dealings 


Personal finance




Small business Finance


 Mortgage brokers


 Financial advice


385 submissions have been received so far, as follows:





New South Wales


Western Australia


South Australia 


Australian Capital Territory, Northern Territory and Tasmania 




Focus areas

Counsel Assisting noted that certain lines of inquiry have already begun emerge:

  • Misconduct – financial services acting on falsified documents, provision of inappropriate financial advice, inappropriate lending, delay in insurance claim processing.

  • Culture and governance – failure to manage conflicts of interest, incentive-based remuneration schemes, commission-payable schemes.

  • Effectiveness of redress – delay and difficulty in resolving disputes.

Further themes may arise.

Conduct of participants

The Commission does not appear to look favourably upon requests for extension of time. A number of large entities informed the Commissioner that they could not comply with the deadline to respond to further questions that were issued on 2 February 2018 asked of the Commissioner by February 13, 2018. The Commissioner noted that the initial request for information was made on 15 December 2017, and that requests for more time may draw inferences. 

The Commissioner further discussed the futility of confidentiality terms of employee, settlement or severance agreements. The Commissioner noted that confidentiality or non-disparagement terms contained in such agreements are not reasonable excuses for any failure to answer a notice to produce or a question in a hearing. Further, any institution that sought action against a consumer for breach of such a clause is likely to invite further inquiry from the Commission.

Going forward

Research papers

The Commissioner will issue a number of research papers on various topics and the financial services industry over the coming year.

Public hearings

The Commission will hold public hearings periodically throughout the course of the year. Details indicating the scope of each hearing will be released before the hearing commences. Most hearings will focus on certain case studies, which will then be used to explore particular topics. 

Evidence for the public hearings will be by witness statement. Leave to appear may only be granted where the individual or institution can demonstrate a direct or substantial interest in the hearing, that is, the case study or the subject of inquiry being considered. It is unlikely unconditional leave to appear will be granted.

The first round of hearings

The first round of public hearings will commence in approximately one month. The first round will consider whether Australians are enjoying their right to be treated honestly and fairly with respect to consumer lending practices. In particular, the Commission will investigate inappropriate home loan, car loan and credit card lending practices. 

The second round of public hearings is expected to consider the financial planning and wealth management industry. This round is expected to consider, amongst other things, the effectiveness of the Future of Financial Advice reforms (which followed the 2009 Parliamentary Joint Committee on Corporations and Financial Services), and conflicts of interest within the financial planning and wealth management industry.

Conclusion of inquiry

The Commission is required to deliver an interim report on 30 September 2018 and a final report on 1 February 2019.

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