By Natasha Pelly

On the 14th December 2017, the Governor-General of Australia announced a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Just over a year later, on Monday 4th February, a 1,000-page report was released, authored by Commissioner Kenneth Hayne. 1

In this inaugural issue of The Seed, we briefly review the report’s key recommendations and seek to understand what impact it might have on the wider economy, consumers and the advertising industry.

In a nutshell: The Commission’s findings
Kenneth Hayne, the Commissioner in charge of the investigation, found ample evidence of immoral business practices across the financial services industry. In the words of one commentator, though not all cases were necessarily criminal, they did “display a profound collapse in moral business judgement”.2

The report laid out 76 recommendations to combat malpractice and guarantee the fairer treatment of customers. It also referred 24 financial entities to the Securities and Investments Commission (ASIC) over possible criminal charges. All major banks except Westpac were referred, with NAB receiving the most overt criticism from the report’s author. NAB CEO, Andrew Thorburn, and Chair, Ken Henry, have since resigned.

The recommendations were predominantly focused on the following areas:
1. Ending the unsolicited sale of financial products (particularly around superannuation and insurance);
2. Banning conflicted remuneration earned by intermediaries like mortgage brokers (legislation due in 2020);
3. Banning annual commissions to financial advisers;
4. Better enforcement of legal standards.

Did the Commission go far enough?
Though some commentators saw the report as a damning indictment of the banking industry, others have described it as ‘disappointing’, ‘a dud’ and ‘gobbledygook’. The AFR stated the report did not go far enough to ensure enforcement, asserting that “simply exhorting people to be more honest will never succeed when their interests are better served by dishonesty”.3 This view was echoed by UBS analysts, who predicted little upheaval for the industry in the wake of recommendations that “fell well short of market expectations”.4

Others claim that the report’s recommendation to ban broker commissions and move to a ‘borrower-pays’ model is short-sighted and plays directly into the hands of the big four. According to Mike Felton, CEO of the Mortgage & Finance Association of Australia, “destroying the viability of the mortgage broker channel would immediately reduce competition”, leading consumers back into the big banks.5 For a more comprehensive review of what the Commission ‘missed’, see Graham Hand’s article on Cuffelinks.6

What impact is the Commission likely to have?
The report has caused little damage to the banks, with shares surging in the immediate aftermath: ANZ was up 4.1%, CBA was up 3.7% and Westpac was up 4.9%.7 This is good news for the Australian economy – the banks must continue lending in order to avoid a credit crunch. However, there is a definite concern that several of Hayne’s measures will impact consumers negatively: “Banning sales commissions and bonuses will decrease competition. Greater regulatory oversight […] will drive costs higher. In other words, the customer will pay”.8 This is likely to erode consumer confidence, which could in turn impact retail sales.

For the banks, the need to repair trust and demonstrate authentic cultural change will be ongoing. From the moment the commission was announced in December 2017 to its conclusion in September 2018, the domestic banking sector increased its advertising spend by +30%. A second swell in brand advertising spend is therefore anticipated. This might cause a tightening of the ad market as banks continue their tendency towards reactivity, flooding the market with late money. Combined with an expected surge in Government spending, it is more important than ever for other advertisers to book early to gain access to the most efficient inventory.

References and further reading:
1: Hayne, K., Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, February 2019, online at:
2: Farr, M.,, Most disturbing parts of the banking royal commission’s final report, February 2019, online at: story/cb2ef71cd334784ce2b6495494cceec1
3: Fickling, D., Financial Review, Banking royal commission’s final report is a dud, February 2019, online at: royal-commissions-final-report-is-a-dud-no-wonder-stock-futures-rose-20190205-h1auyr
4: Mott, J. quoted in Chau, D., ABC, ASX expected to rise, with banking royal commission unlikely to cause ‘upheaval’, February 2019, online at:
5: Felton, M. quoted in Kane, A., The Adviser, Association heads slam ‘damaging’ RC final report, February 2019, online at:
6: Hand, G., Cuffelinks, 8 problems the Royal Commission missed, February 2019, online at:
7: SBS News, February commission report: Big bank stocks surge at ASX open, February 2019, report-big-bank-stocks-surge-at-asx-open
8:Verrender, I., ABC, Post royal commission report, banks will start a new lobbying campaign – but customers pick up the bill, February 2019

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