When the final report of the Banking Royal Commission came out in 2019, the conclusion was clear – things need to change in the financial system. The changes envisioned by the experts encompass all the areas and all the levels in the banking industry, from the high-ranking executives down to the employees that work directly with the clients.
The culture of greed must end
The final report of the Australian Royal Commission into Misconduct in Banking, Superannuation and Financial Services Industry uncovered an appalling array of dishonest practices, many of Australia’s leading banks and financial institutions implementing a top-to-bottom culture of greed that cost the customers millions of dollars. The report presented 76 recommendations meant to prevent such a scandal from happening in the future. Let’s have a look at the most relevant changes suggested by the commission.
Background checks for brokers
While the scandal exposed institutional malpractice and a sales-driven culture, much of the blame resides with the brokers that interacted directly with the customers.
According to the commission, many brokers deliberately offered customers loans they could not afford and on such terms that would drive many people to bankruptcy, which they actually did.
According to the report, to prevent such things from happening again brokers must act with the best interests of the customer in mind. This means that, for the future, a broker could be fined for disregarding the customer’s financial situation on the excuse that it was the company policy that made him act that way.
Australian Brokers will have to undergo pre-employment background checks like the ones provided by the Australian National Character Check (link) to make sure they do not have prior misconduct charges on their criminal record. For the customer this means that a dishonest broker fired from a financial institution for misconduct will not be able to find a position in another bank or lending institution. Further information on commonly asked questions about Australian criminal record checks can be found here.
Background checks for financial advisers
The Banking Royal Commission recommended in its final report that banking licence holders should report to the Australian Securities and Investments Commission any concerns about the professional conduct of independent financial advisers. To keep things under control and the customers protected, such reports should be made on a quarterly basis.
One way of making sure financial advisers take their responsibilities seriously is imposing mandatory financial services background checks on the profession. According to the commission, the profession will be governed by a single body and financial advisers will have to be registered with it.
Special provisions for agricultural bankers
The Banking Royal Commission dedicates an important part of its report to the agricultural banking sector. The commission was appalled by the extent of the misconduct in this area, with many distressed farmers being burdened with disastrous loans.
First of all, the report recommends checks on all the banking employees working in this particular field to make sure they have a reasonable experience in agricultural matters. At the same time, they should undergo pre-hire background checks to exclude people convicted for gross misconduct from ever working in the same capacity again and destroying the lives of other farmers.