UPDATE Day 2 for Australian Banks While a Bomb Investigation Report is about to be published

Release@

* AMP shares hit a record high, big banks bounce back

* Survey should recommend radical reforms to retail banking

* Financial regulation is likely to play in the May election (stock update, listing of a broker, update of the time of publication)

SYDNEY, Feb 4 (Reuters) – The Australian government is due to release on Monday the final recommendations of the independent investigation that revealed systemic wrongdoing in the Australian financial sector, which could lead to drastic changes in the country's banking sector. .

Major banks, insurers, pension funds and regulators overseeing the financial sector are preparing for a blunt summary of their misdeeds and weaknesses and a list of tough recommendations, including criminal prosecution.

The Royal Commission was an independent quasi-judicial body headed by a former high court, to which the government had initially reluctantly asked to investigate the financial sector's actions following a series of bank scandals. .

For 11 months, its public hearings shocked the country and swept more than 60 billion Australian dollars ($ 43.4 billion) of the main financials, investors taking into account the prospect of stricter regulation, costs compliance and lower margins.

Commission lawyers also explained to regulators why they seemed reluctant to repress wrongdoing, sometimes penalizing companies with a simple press release.

"There will be nothing positive in the recommendations as the banks have clearly violated various legal obligations and customer service obligations," said Matthew Wilson, a banking badyst at Deutsche Bank.

In particular, badysts expect the survey to recommend stricter enforcement of responsible lending laws, the termination of some conflicting commissions to financial advisors, and limits on bonuses paid to executives.

In a separate but related decision Monday that highlighted the new, tougher regulatory environment, the Australian corporate watchdog group ordered a branch of the Commonwealth Bank of Australia to stop taking financial advisory fees because of concerns. regarding its billing practices.

The report of the Royal Commission, to be released around 5:20 GMT, precedes the elections scheduled for May, which, according to polls, give victory to the left-liberal Labor Party. The Labor Party says it intends to adopt all the recommendations of the commission.

Conservative Prime Minister Scott Morrison, who initially rejected Labor's calls for an investigation into the banking system, calling them "populist vexations," said he also plans to follow up on most of the recommendations.

But he warned against outbidding and reducing credit flows, a likely battle for the government as it fights for election survival.

DAMAGE CAUSED

Even before the release of its final report, the survey had already pushed senior executives to lose their jobs and had generated billions of dollars in correction payments for customers.

The most affected company is the financial planner AMP Ltd, which saw its CEO, president, chief counsel and three directors leave the board after proving that its board had falsified a report. independent body for a regulator.

AMP shares fell 4% to a record high Monday and have more than halved since the start of the survey in February 2017, the largest decline among major institutions. The 170-year-old company, which denied a wrongdoing, issued a profit warning on Jan. 25.

The "big four" banks – CBA, Westpac Banking Corp., the Australian and New Zealand banking group and National Australia Bank – and AMP have already pledged over A $ 2 billion to their injured customers.

Large bank stocks fell slightly in early trading on Monday, before reversing, registering gains of about 1% at lunch time, which allowed the broader market to expand. increase by 0.3%.

"There is more and more speculation among traders that … we could actually have more certainty in the industry, despite bad news, and this certainty will be enough to generate a rebound this week," said Michael McCarthy, chief market strategist at CMC Markets.

(1 $ = 1.3822 Australian dollar)

(Report by Byron Kaye, additional report by Paulina Duran, Tom Westbrook in Sydney and Colin Packham in Canberra, edited by Stephen Coates)