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17 Dec

Banks put profits before people: Treasurer

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Treasurer Josh Frydenberg says the culture and conduct of the financial sector have fallen below community standards, with greed and profit coming before honesty and integrity.

Speaking just after the release of an interim report of the royal commission on Friday, Mr Frydenberg said banks and other financial institutions had “put profits before people”.

He said it was clear bad behaviour had permeated the culture of the big banks, with misconduct going largely unpunished.

“This interim report is a frank and scathing assessment of the culture, conduct and compliance of our financial system,” Mr Frydenberg told reporters in Melbourne.

“ns expect and deserve better.”

The three-volume interim report offered a blunt assessment of the reasons behind misconduct in the banking sector.

“Too often, the answer seems to be greed, the pursuit of short term profit at the expense of basic standards of honesty,” the commission said in its report

“How else is charging continuing advice fees to the dead to be explained?”

Commissioner Kenneth Hayne said in the report banks had searched for their “share of customers’ wallets”.

“From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales.”

The commission found when misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done.

“The conduct regulator, ASIC, rarely went to court to seek punishment for misconduct. The prudential regulator, APRA, never went to court,” the report said.

“Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking.”

Mr Frydenberg said it was clear regulators had been working far too closely with the sector and needed to be stronger in stamping out bad behaviour.

However, he argued whatever the criticisms of the regulators, it was important to remember financial institutions themselves were responsible for the misconduct.

“So they are ultimately – and the individuals involved are ultimately – the ones who must be held accountable and responsible for their actions,” the treasurer said.

“It is incumbent upon those in the financial services sector and those regulators who are charged with enforcing the law lift their game, because the public deserve it and the public expect it.”

Mr Frydenberg again made it clear that if the royal commissioner asks for an extension, it will be granted but no such request had been made.

Labor deputy leader Tanya Plibersek said if Labor won the next election, it would establish an “implementation task force” to deliver the recommendations of the commission’s final report, which is due on February 1.

“Labor is announcing that we’ll crackdown on the sickening rorts and rip-offs that have been exposed through the royal commission,” she said.

“Under a Shorten Labor government, Chris Bowen as treasurer will report to the parliament every six months on progress in implementation until the recommendations of the royal commission are fully implemented.”

She pointed out the Liberals fought “tooth and nail” against establishing the royal commission.

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