Over the past 10 months or so, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has placed Australia’s big banks and financial services entities under intense scrutiny.

This afternoon, and two days ahead of schedule, Commissioner Hayne delivered his Interim Report (in three volumes) to His Excellency General the Honourable Sir Peter Cosgrove AK MC (Retd) Governor-General of the Commonwealth of Australia.

The Interim Report confirms what had become apparent as the Royal Commission continued and the headlines started to pile-up. Over many years, financial services entities in Australia have conducted themselves in ways which do not accord with community standards or expectations and, in many cases, the law.

The Royal Commission has, over the course of the past 10 months, shone a light on that conduct – flushing out example after example of misconduct and questionable practices, bringing such conduct firmly to the public’s attention and exposing financial services entities to widespread condemnation.

It is clear that some of this conduct was known to regulators and the public generally before the Royal Commission – much would not have yet come to light but for the Royal Commission process.

The Interim Report is lengthy, and will take time to digest in full, however we provide below a brief summary and snapshot of the key elements we’ve identified in the Interim Report.

In reality the Interim Report deals with just two core questions, in the face of the various conduct (and misconduct) which has been identified over the course of the year - why did this happen and what can be done to prevent it from happening again?


The Interim Report clearly points to the pursuit of short term profit as sitting at the core of the conduct which have come to light as a result of the Royal Commission.

The Interim Report is highly critical of the “sales culture” which has been allowed to pervade the banks and financial services entities, an environment where staff are measured and rewarded by reference to profit and sales at the price of honesty and ethical business practices.

The Interim Report goes on to suggest that, even when it had been identified in the past, misconduct has not been properly investigated, prosecuted and punished by those charged with doing so. In particular, the Interim Report lines up APRA and ASIC for particular criticism:

“The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court. 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 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. 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.

It appears relatively clear now that the Commissioner's final report will make a number of recommendations in relation to the regulation of the financial services industry. A shake-up of the powers and remit of ASIC and APRA appears likely – and providing the regulators with teeth (or ensuring that the regulators use them) appears to be one area that the Commission is very much focussed on.

What can be done to prevent the conduct happening again?

The interim report acknowledges that, in the face of headline after headline, both regulators and financial services entities have been taking voluntary steps over the past year to get their houses in order – in a sense, pre-empting the recommendations they consider likely to be made in the Final Report next year.

The Interim Report appears to view the fact that those pre-emptive steps have been taken already as a positive – including announcements about new programs for refunds to consumers affected by entities’ conduct, the abandonment of products or practices, the sale of divisions of businesses and changes in industry remuneration policies.

However, it is clear that the Commissioner considers there to be much more work to be done – and the tenor of the report suggests that self-regulation and belated voluntary steps to remedy past misconduct will not be sufficient.

Instead, the Interim Report turns to considering what further steps will be required:

“to have entities apply basic standards of fairness and honesty: by obeying the law; not misleading or deceiving; acting fairly; providing services that are fit for purpose; delivering services with reasonable care and skill; and, when acting for another, acting in the best interests of that other?”

Chapter 10 of the Interim Report perhaps provides the most accessible snapshot of the Commissioner’s current thinking at this point in the Royal Commission.

In a fairly concise chapter, the Commissioner identified each of the areas which have been the focus of the initial phases of the Royal Commission and, in respect of each, sets out the key areas of concern which have arisen. The Commissioner also goes on to pose a number of questions which appear to firmly suggest the direction in which the Commission is heading.

Whilst the Interim Report is substantial, and will take some time to digest, we have extracted below the key areas of concern identified by the Commission in respect of each market sector – as well as the key questions posed by the Commissioner in the report which perhaps give the most insight into where the final report of the Royal Commission is likely to land.

Click here to view the table.


The Interim Report reads, in many ways, as a stream-of-consciousness document – providing insight into the current thinking of the Commissioner. It is clear, however, that the Commission’s final report will focus on three key areas:

  • culture and incentives;
  • conflicts of interest and confusion over roles and duties in the financial services market; and
  • regulator effectiveness.

In particular, the Interim Report devotes considerable time and attention to the last of these points. Although the big banks and financial services providers have taken up most of the headlines over the past year – it now seems clear that the regulators will not escape the Commission’s attention.

The suggestion that it ought to be mandatory for ASIC to prosecute all instances of identified misconduct unless it can be shown to be contrary to the public interest is particularly interesting and suggests that the regulatory regime is set for a shake-up once the final report is handed down.

The Interim Report, in its entirety, can be found here.