How to fix the banking system in the aftermath of the royal commission

As submissions for the royal commission of the poor, the role of the law is not so great.

The hope is when the final report is released by Commissioner Kenneth Hayne.

The royal commission has had a profound impact on some organizations. ASIC has become tougher, some organizations have banned grandfathered commissions, divisions have been shutdown, dodgy products are canceled. Executive compensation packages have been established in some senior ranks including AMP and NAB.

But the fear is what happens when the blowtorch is switched off? Will the banks return to arrogance and greed? Will the regulators slip back into their old ways of being timid and too trusting? Do you think that they will do dilute and delay the introduction of recommendations?

Two of the more interesting submissions, from the Consumer Group, the Financial Rights Legal Center (FRLC) and the Greens.

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The FRLC has a lot of misery caused by financial sector misconduct, including customers being ripped off by shoddy financial advice.

It calls for a regular sector wide-review or re-run of the royal commission. It is a smart idea that should be embraced.

The FRLC's overarching theme is the law needs simplifying, consolidating, updating and strengthening. "Loopholes must be identified and closed to poor corporate behavior." Intervention is required to address cultural problems and consumers need to be better compensated. It is spot on.

It offers a blueprint of nine actions to fix the system.

Director duties

They include tackling cultural problems by introducing corporate social responsibility to directors, extending the Banking and Executive Accountability Regime (BEAR), ending all forms of conflicting compensation and professionalising the industry by strengthening licensing, conduct, qualifications and ethics training.

Importantly, the FRLC wants to be broadened and linked to poor consumer outcomes and insurance companies, instead of to the current regime. "BEAR in its current form is unlikely to include any consequences for the string of scandals that the royal commission and other inquiries have identified," the submission says.

Broadening directors' requirements by requiring explicit and mandatory consideration by directors of interests other than shareholders would also make a difference.

The brutal reality is less than like. If directors believe their main responsibility is to shareholders then an emphasis on profit at any cost will quickly return.

FRLC's second recommendation tackles the law. It wants to make the right to pay less, but it does not have to be used.

It also wants to junk insurance products, insurance, accidental death and accidental injury. And it wants the anti-hawking regime.

It also calls for loopholes to be closed by bringing debt management into the financial services regulatory framework, buy-now-pay-later providers under the credit law umbrella and small business lending in the regulatory framework.

It wants external dispute resolution (EDR) and code of practice coverage for non-bank lenders and a tougher corporate regulator by better resourcing. It wants to be enforced, strengthened, monitored, enforceable and able to attract effective sanctions through co-regulation.

For the insurance sector, which has been involved in some grubby, egregious behavior, it wants the prohibition on unfair contract, to be extended to general, life and group insurance and legislation. and mandatory codes of conduct applicable to all insurers and super trustees.

The CommInsure scandal in March 2016 highlighted the issue of medical definitions of heart attacks and rheumatoid arthritis, where CBA had refrained from updating the definitions .

Life insurers have been allowed to fail in their life insurance policies that will not be paid out. They have been able to do this because it does not breach the law. This needs to change; so does the code of conduct which in its current form country lip service to the industry.

The FRLC wants a last resort compensation scheme, something the government has gone silent.

It is suggested by the Greens in its submission to the Royal Commission, as well as a recommendation to release the report in February then undertake further hearings.

The ALP is calling for an extension to the royal commission on the basis of 12-month timeline prevented it going far enough. To put it into perspective, only 27 victims were invited to testify, leaving many voiceless voices. Too many companies and super funds were ignored and others glossed over.

The Greens offers a series of public relations "People's Bank" to give "affordable" services and inject "real competition" into the sector. Savings accounts would be pegged to the RBA cash rate, with debit cards linked to these accounts also available. Term deposits would be pegged to the Commonwealth bond rate and pegged to the RBA cash rate.

It also calls for an expanded BEAR, structural separation of financial institutions, an end to value-based commissions on retail grade products, an end to the carve-outs of the best interests duties for retail grade products and an overhaul of regulation.

It proposes the ACCC be the conduct regulator for retail banking, superannuation, insurance, retail grade intermediators and the sale of other retail grade products and services. APRA would continue to be the system (prudential) regulator, but no longer required. ASIC would be the conduct and system (market integrity) regulator over the remainder of the financial system.

Other proposals include the establishment of a financial regulators badessment board, a last resort compensation scheme and an increase in funding for financial counseling and advocacy centers.

Greens senator Peter Whish-Wilson, who has been a fixture on a miscon- on from bank-bashing rhetoric to bank-changing policies. "If we all agree to the system is broken then it is incumbent on the system." Groundhog Day of big talk and little action.