Australia's largest banks may face prosecution after probe

Australia's Treasurer Josh Frydenberg speaks at a press conference in response to the releasing of the Banking Royal Commission findings at Parliament House in Canberra, Monday, Feb. 4, 2019. Three of Australia’s largest banks face potential charges over a yearlong investigation into misconduct in the nation’s financial sector that has recommended greater industry scrutiny and more safeguards for customers. A government-commissioned inquiry found that widespread misbehavior in the banking and financial services industry often went unpunished. (Mick Tsikas/AAP Image via AP)
Australian Banking Association CEO Anna Bligh speaks at a press conference in response to the releasing of the Banking Royal Commission findings at Parliament House in Canberra, Monday, Feb. 4, 2019. The Australians government on Monday agreed to create a compensation fund for people who lost money from bad financial advice and to set rules to help drought-stricken farmers avoid bank foreclosures.(Mick Tsikas/AAP Image via AP)

CANBERRA, Australia — Three of Australia's largest banks could face prosecution following a yearlong investigation into misconduct recommended tougher oversight and better consumer safeguards.

A government-commissioned inquiry found widespread misbehavior in the banking and financial services industry that often went unpunished.

Commissioner Kenneth Hayne referred 24 incidents of misconduct to regulators for further investigation and possible civil or criminal charges against executives and corporations, including all major banks except Westpac Banking Corp.

The banks facing potential charges are Commonwealth Bank, ANZ Banking Group and National Australian Bank.

Hayne reported to Treasurer Josh Frydenberg who said the financial sector must change.

"It's a scathing assessment of conduct driven by greed and behavior that was in breach of existing law and fell well below community expectations," Frydenberg said.

The share prices of banks and other financial institutions have slipped over the past year as Hayne's inquiry heard evidence of customers being charged fees for services that weren't provided, dead customers being charged fees and vulnerable people being sold inappropriate financial products.

Banks have tightened their lending criteria in recent months, anticipating closer scrutiny.

Australian Banking Association chief executive Anna Bligh, a spokeswoman for the banking sector, said Hayne's recommendations represented a huge overhaul and top-to-bottom reform of banking and finance in Australia.

The inquiry would change what financial services and products banks could offer, how staff were paid and create new offenses for wrongdoing, she said.

"Today's report contains some very tough medicine for banks, including potential court cases," Bligh said.

She was grateful that Hayne did not recommend tightening of lending rules.

"Banks were very concerned that there may be recommendations that would see lending practice tighten up and perhaps put pressure on the flow of credit into the economy," she said.

The Australian government responded positively to all Hayne's 76 recommendations. The government agreed to create a compensation fund for people who lost money from bad financial advice. It also agreed to set rules to help drought-stricken farmers avoid bank foreclosures.

The government accepted the report's recommendations to strength protections for consumers and improve financial sector accountability and regulatory effectiveness.

The Federal Court would be given jurisdiction to hear corporate criminal charges, which often are not heard for more than two years in congested state courts.

A new oversight authority would also report regularly on the effectiveness of the two regulators in the financial sector, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.

Must Read

Huawei executive warns Australia risks economy...

Jun 27, 2018

A Huawei executive says Australia could damage its economic future if it bans the Chinese...

Trump and Trudeau meet face to face for the first...

Feb 12, 2017

The first face to face meeting between Prime Minister Justin Trudeau and U.S. President Trump could...

US says NAFTA talks are progressing very slowly

Jan 29, 2018

U.S. Trade Rep. Robert Lighthizer says talks to rewrite the North American Free Trade Agreement are...

Trudeau declines to meet Trump because of US...

Jun 1, 2018

Canadian Prime Minister Justin Trudeau says he offered to go Washington this week to complete talks...

Trump barrels into G-7 summit, ready to fight US...

Jun 9, 2018

President Donald Trump has charged into the Group of Seven summit in Canada, late and ready for a...

About Us

Banking Reporter is the largest-circulated online business news in the United States, bringing a whole new genre of business journalism more up close and more incisive.

Contact us: sales[at]bankingreporter.com

Subscribe Now!