There was pressure exerted on the Federal Government to have a Royal Commission because of the uncertainty in economic sectors and malfunctioning practices that were taking place in society. The federal government has a pressure from society and legal bodies due to increase in financial sector uncertainties. In order to deal with the certainties and increasing pressure from opposition and local community they have to finally commission of royal commission that will look after all the misconduct in the banking and financial services industry which was headed by Kenneth Hayes.
The sole purpose of forming this royal commission was to look into the consideration of financial which conducts and disputes that the economic sectors which includes misconduct and behaviour in financial, big banking segments like Australia and New Zealand bank, and some other organizations involving in financial sector. The royal commission was looking into the reports and complaints filed by common people and investigating these complaints in order to provide justice and legal claims to people who have been a victim of financial misconduct and financial misconduct sector in Australia.
With increase in vegetation of people the federation government has to finally a point and conductor royal commission for this purpose only. In order to deal with the certainties and increasing pressure from opposition and local community they have to finally commission of royal commission that will look after all the misconduct in the banking and financial services industry which was headed by Kenneth Hayes.
There were many arguments and counter statements by the government and social services sector that was opposing the establishment of a royal commission that was appointed primarily for looking into the financial concerns and misconduct by commercial banks and organisations that was ruling into the financial segments. Some of the arguments that work stated by government and financial sector to reject the call for royal commission are as follows:
- There is no use of royal commission as there was separate law enforcement agencies that are looking into financial and misconduct by financial bodies and banks.
- Commissioning a royal commission for particularly financial misconduct would create duplication of work and that would lead to underperformance of financial segment as well as create a burden on federation government.
- In order to stop federation government form drafting a special commission for undertaking the cases and complaints register under financial misconduct there was chances of highlighting of different scams that might be a danger for federation government.
- The collision Government and Australian financial sector was resistingagainst the formation of royal commission that is going to counter the misconduct in financial segment and banking sector as they feel that with the commission of a agency named as royal commission particularly working and investigating on the misconduct and behavior of financial segment and banking segment of Australia there are high chances of highlighting of different scams that were still not taken into consideration and are away from media coverage. With the highlight of different other misconduct and financial scams in the economy there would be a danger on the stability of collision federation government in Australia that will create a political issue in the country.
- There are are high chance of my practices in financial sector by top banks and financial organisations like AMP, but by forming a separate commission they won’t be able to continue their misconduct and malpractices and can be highly affected by royal commission working.
- All the defaulters in financial segment and banking sector were visually opposing the formation of royal commission in Australia as they are looking it as a danger which may stop their malpractices and misbehavior in the economic sector.
- The findings of the royal commission was supposed to be a good finding that would help them in finding out the defaulters in financial statement but it seems to be an ordinary research in nature.
- With the formation of royal commission for keeping an eye over the functioning of financial segment there are high chances of investigation into other departments and segments also that will create a problem for coalition government in near future.
The royal commission was closely examine the behavior of big banks in Australia (here taking NAB) that can help them in investigation of misconduct and malpractices that were carried why this organization. Some of the governance issues that the commission investigations and hearing identified for NAB are as follows:
- The bank was following a sales driven culture which wants profit at all cost without concerning about customers. The practices that were taking place in bank work completely selling centric in nature which needs High commission and profits at any cost.
- The royal commission closely conducts earrings from all the customers that can help them in drawing conclusions against the bank and its misconduct behaviour towards the customers.
- It was found that the commonwealth Bank was targeting soft customers who have no prior knowledge of banking and providing them high rates and charging them for no services as they were not aware about it.
- The royal commission found that there were many whistleblowers in this malpractice but due to low hearings and fit on investigation agencies they were not able to raise their voice against the malpractices and misconduct by the banking organisations.
- It was found that other banks on on which the investigation is carried on work wilful defaulters and supporting the maar practices of each other in order to survive and continue their misconduct and practices against customers.
- Most of the customers at these banks was retirees who were not aware about banking practices and was looking for stable interest for their retirement age as the bank was said to be a people’s Bank.
- Due to the bad practices of banking corporations in Australia the lifetime savings of retirees started disappearing that resulted in to wide spread agitation among the customers of bank.
- The cheated customers decided to took on this banks and the corporate regulator in order to get justice from their malpractices and misconduct behaviour.
- The customers who decided not to file case against the banks lost their life long savings due to their misconduct and malpractices.
- During the time of the investigation Central banking association once said that it has cleared all the malpractices and they don’t have any place for rouge financial planners.
- The federal government was looking forward to make changes to the financial advice legislation that will introduce new commissions and kickbacks that was earlier banned by previous government. If these reforms got introduced again then it will directly go to mean financial players and would be a betrayal to all the loyal customers.
- The four biggest banks of Australia was controlling around 80% of the nation’s financial planning industry and was continuously fighting in order to dominate the private wealth sector and making billions to their profits.
- The band took advantage of decent customers taking away their life time saving send disappearing there saving in order to make high profits for the banking corporation without taking any care of their customers.
- NAB was charging unfair fees and commissions on their bank accounts that resulted into high fees from their banks and detecting a huge amount that resulted in draining of their savings account dramatically.
From a governance perspective, the directors responded to the commission findings in the following ways. The board members responded to different reporting challenges that were identified royal commission in misbehavior and malpractices that work practiced by top banking organisation in Australia are as follows:
- In order to ensure that the board is getting right information from the management the law committee headed by Bruce Cowley decided to ensure many practices.
- The royal commission was closely understanding and investigating the misconduct in banking, super animation and financial services industry were having much wider applications and implications for senior engagement officers and board members.
- As per the concerns were encapsulated in recommendations 5.6, the following set of practices were advised which includes assessing and identifying the culture and governance of the banking sectors, identifying the problems with particular governance and culture in the sector, dealing with the problems identified and proposing and recommending certain changes and solutions that can be taken into consideration in order to avoid those identified problems and issues.
- One of the finding that was presented by royal commission was that many times the board members were not aware about emerging non-financial risk that resulted in malpractices and misconduct and misbehavior in the segment.
- In order to avoid misconduct and malpractices it was advisable that the directors should take active actions and should involve themselves in the risk identified.
- The commissioner said that in order to challenge the management of a banking corporation there is a requirement of huge quantity of information and data that can help in working and supporting the evidence to the great extent that came help in easy counter statements and proof supports.
- The information must be right in nature that can help in investigating the areas in a better way with better control and auditing.
- Australian prudential regulation authority, guidelines can be used in order to enquiry different banking corporations as they have clear guidelines for investigation and also defines actions that can be taken into consideration to be against any misconduct or malpractice in financial, banking corporation, superannuation etc.
- As per the guidelines of Australian prudential regulation authority following set of actions needs to be taken that can help in maintaining a close observation over functioning of banking sectors that includes the following steps.
- There needs to be a increased level of interaction between so and chair that can help in discussing the agent in order to recast and ensure the robust and effective insights from different topics which includes mostly current risk and diverse topics of banking segment.
- With the help of of increase interactions there would be a better chance of effective decision making and deep discussions that can help in sorting out the challenges and issues easily and also help in reducing the chances and risk of malpractices and misconduct in the segment.
- The board members can challenge the chair based on the significance of their knowledge and discussion and in order to do so they need to have a strong and sound knowledge of all the internal affairs that are prevailing in the organisation.
- In order to deal with risk and threats there needs to be a adaptation of of reactive mindset that can help in dealing with situations with prominent and actionable nature.
From an enforcement perspective, the following set of actions were taken by Australian prudential regulation authority and ASIC to address the the criticism raised in the report.
- The commissioner of ASIC decided to speak on 36th annual conference of banking and financial services law association in order to provide clarity on addressing the criticism presented in the report. Hi focus don’t addressing the issues with strategic focus for upcoming years that can help in understanding the misconduct in which behavior that were prevailing in the segment.
- ASIC have established in office of reinforcement within the organization, there are also planning to accelerate enforcement outcomes and also willing to impose penalties on any malfunction practices in order to stop wrong practices in the sector of financial undertakings.
- In order to continue operations with ASIC, different licence are going to be e required including enhancements licensing that helps in identifying breach reporting.
- He also said that in order to regulate fair practices different regulatory tools are going to be used which have new owners that will help in product intervention and better supervision and enforcement.
- He further quoted that the substantial harms that misbehavior in misconduct camp harm the society e and consumers to a great extent as it was highlighted by royal commission.
- As per the findings provided by the royal commission it would be easy for the regulatory boards to identify the misconduct easily and can take corrective actions for them. He made different observations on the financial services sector which includes connection between poor and misconduct and the pursuit of of gains and profit by the organization, the misuse of power in information bi financial services, the presents and visibility of conflicted intermediaries that resulted in poor relationship between financial services and customers and investors.
- They were of view that there is a need of change in the culture and regulatory body of banking sector that can help in providing transparency to the operations.
- They said that different new regulations are going to be in forced for increasing transparency and fair practices in the banking sector that can help in bringing back the trust of customers and investors in the financial segment of the society.
- They said that they are taking into consideration provided by royal commission that is going to help them in ensuring fair practices and also can help in protection of customer rights against any wrong conduct or misbehavior.
- They said that they would provide enough time to demonstrate different changes that can be made using different principles and these are going to be durable in nature.
- Different compliances are going to be form that can help in reviewing the service laws of financial segment and obey the law principle is going to be e and foes in the entire financial segment, banking segment and superannuation.
- They also provided the review of not litigating the issue. He said that it is a procedural discipline that needs regular adoption. He said that the organisation already have different laws for satisfying the breaches and promises and litigating it would create hassle in the process and delay in decision making.
Some of the implications of these findings that the corporate governance more generally in Australia have are as follows:
With the incorporation of royal commission that was formed basically for investigation of malpractices and misbehavior in banking sector and financial services, the customers were looking for justice that they can have with a a lion and trustable agency but the field to provide sufficient satisfaction to all the customers who have registered complaints against the misconduct and bad practices in financial services by top banking institutions like commonwealth Bank of Australia, Australia New Zealand bank etc.
People were looking for solutions of their problems as their lifelong investments and savings drained by this Bank by charging inefficient charges and fees on account holding but due to inappropriate findings by royal commission they were not able to get it.
As per the corporate governance principles and recommendations for different organisational unit which states that:
- It is very important to have a strong foundation for management and oversight in an organisation as it helps in providing clarity in guidance and rules which was not fulfilled by royal commission as they were not able to investigate the issues properly in case of forgery and malpractices carried out by banking institutions. The principle was not successfully fulfilled by the corporations which was solid drawback for the corporations practicing in Australia.
- The principle which emphasis on structuring the board to be effective and adding value to the organisation was also not fulfilled is the top management of the institution were also involved in the malpractices and misconduct towards the customers. This resulted in loss of customers trust and confidence from the big banking organisation that resulted in failure of the system.
- The another principle which was not fulfilled in the case was safeguarding the integrity of corporate reports that aims at providing a confidentiality of different processes to verify the integrity of corporate reports as there was no transparency in the processes and task carried out by banking organization.
- The another principle which was stated by corporate governance and regulation authority was making timely and balance disclosures of the events and processes which was again violated by the banking operations as they were conducting mark practices and misconduct behaviour against the customers that resulted in different kind of agitation among customers and investors.
- One of the biggest principle that was violated in the provided case is respecting the rights and security of holders as the customers were cheated on different bases that resulted in violating the rights and security e and disrespecting there integrity.
- Another principle which was violated is recognising and managing the risk that might improve the productivity and functionality of the organisation.the board members of the banking operations were not able to identify the malpractices that were carried in the banking organisation and the mean financial players were taking and harassing the values and rights of the customers. They were not able to force in the situation due to which this resulted into a great damage and this and ultimately resulted in losing their valuable customers and their trust.