The recommendations arising from the Banking Royal Commission will only achieve lasting change if they result in a cultural change from Banks and Insurers.
Obviously this is not legal commentary but as someone who has been in business for over 30 years, it is difficult not to observe that Banks and their senior executives see us (the consumer) as numbers on a page and for all levels of the banking / insurance industry, as a bonus based on “profit” from lending or premiums.
For change to occur, Banks would need to see the consumer as individuals, accept personal responsibility at all levels and be obliged to assess their practices based on criteria such as ability to pay.
Turning to legal observations, after just over 12 months, 130 witnesses, 10,000 public submissions and more than a few admissions of bad behaviour, we are left with 76 recommendations for change, some of which are summarised below:
If you use a mortgage broker you will be liable for upfront fees. In exchange, no trailing fees will be charged. In theory, this may result in reduced interest rates.
Each of us will be “stapled” to a super fund, meaning less movement between funds so less fees. The right to change funds at the consumer’s request will remain.
Banks will need to have regard to issues such as natural disasters. In addition, Banks will need to allow for mediation of disputes and employ agricultural advisors.
The provision of bulky disclosures which no one reads will be replaced with a duty to take “reasonable care”.
Starting with the resignation of two senior executives of the National Australia Bank and the restructure of Boards such as AMP, there is a mood for change within the sector.
Whether we will see true change will depend on Banks and Insurers accepting that profit is not the sole criteria for being part of the four pillars of our commercial dealings. Cynically, true change may also depend on whether criminal charges flow from some of the admissions.
How will the property sector be impacted?
Whilst it is still early days, the property sector can be cautiously optimistic.
The Federal Government has indicated a willingness to show restraint. The Opposition is committed to engaging in a consultative process with the sector. The Property Council of Australia has commended such a deliberative approach from the major parties.
The reform process is likely to lead to some short term pain. However, if the Government and more importantly, the banking sector maintains a focus on restoring trust, better consumer outcomes, maintaining the flow of credit and promoting completion, the long term gain may well be worth the short term pain of reform.