“People of the same trade seldom meet together, even for merriment and diversion, but that the conversation ends in a conspiracy against the public or in some contrivance to raise prices.”Adam Smith, The Wealth of Nations, 1776
After a year of unprecedented industry scrutiny, 68 days of hearings, 130 witnesses and over 10,000 public submissions, there was nothing radical in the Final Report. The lack of a big hit such a separation of wealth and banking or merger of regulators made it easier for the Government to accept the recommendations.
Kenneth Hayne and his staff have left an indelible mark on banking and finance, and we've enjoyed their work. An ACCC investigation showed Cuffelinks is punching into the big league for Google searches on the Royal Commission. It will continue as the implications unfold over 2019.
The Final Report starts its 76 recommendations with four observations on:
1. the connection between conduct and reward
2. the asymmetry of power and information between financial services entities and their customers
3. the effect of conflicts between duty and interest
4. holding entities to account.
While there's no doubt the Commission did some great work, we also highlighted over 2018 how it was spending an inordinate amount of time on a few issues. In missing some problems, the risk is the banks will focus only on what the Commission identified. Leading futurist, Phil Ruthven, sees new problems on the horizon for banks, even after their exits from wealth management.
The Final Report focusses on better use of existing structures and added review mechanisms, and it recommends 24 referrals for prosecution of institutions. Hayne confirms the strength of the banking system and probably did not want to compromise this by going harder.
Only five sitting days of both houses are expected before the Federal election, which means the current Government may not be the policy implementer. Either way, the Royal Commission is sure to be an election issue, and there's a long way to go to achieve Kenneth Hayne's aspirations.
Graham Hand, Managing Editor
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