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SYDNEY: A major shake-up of the highly profitable banking sector in Australia is coming, while a historic survey of financial services sector abuses releases its final report on Monday.
Among the recommendations issued by the royal commission, radical legislative and regulatory changes, a crackdown on bankers' payrolls and even criminal prosecution of senior executives could be among the recommendations.
The leading lenders, including the country's "big four" banks – among the richest in the developed world – have been the subject of scrutiny in recent years, following allegations of questionable financial advice, life insurance and mortgage fraud.
Some unscrupulous brokers have been found charging customers long after their deaths.
The large-scale survey was launched in late 2017 to appease the public anger aroused by their reprehensible behavior. A preliminary report released in September also criticized the greed culture of banks.
"I think there will be some substantive changes … regarding the strengthening of regulators and increased penalties (for reprehensible behavior)," said Warren Staples of RMIT University at the University of Toronto. # 39; AFP.
The Australian Conservative government has been cautious in pledging to implement the report's recommendations in advance, while the Opposition Labor Party, on the left, has stated that He would adopt the suggestions in their entirety.
But with the federal election scheduled for mid-May, lawmakers eager to take advantage of the public's anti-bank sentiments should subscribe to potentially explosive conclusions and recommendations.
Regulators, considered too soft towards companies, and standards in the areas of mortgage lending, financial planning, insurance and pensions will also be on the line of fire.
The commission's hearings highlighted the poor behavior of financial corporations and executives whose rules were repeatedly broken, personal gains take precedence over client interests and loans to clients who could not afford them. refund.
These sectors are expected to be constrained by stricter standards such as tougher penalties for misconduct and increased behavioral scrutiny.
The recommendations could go as far as prohibiting certain types of sales practices and the removal of underperforming pension funds.
"OVER-INFLATED COUNTRY"
Regulators, the Australian Prudential Regulatory Authority (APRA) and the Australian Securities and Investment Commission (ASIC), would have all power to chase offenders, while being subject to performance.
Stocks of major banks weakened in recent days before the release of the report, but Bell Potter's banking analyst, TS Lim, said investors had taken into account any potential bad news.
"I think the answer will probably be limited … I think they'll increase fines or penalties for companies that behave badly," Lim told AFP.
"I think there should not be too many new laws."
A royal commission was created ten years after the global financial crisis, when most bank executives were left behind and largely unpunished. According to Staples, the investigation needed to go further and tackle a fundamental cause: performance-based pay.
"These banks have been extremely profitable (…) and I think a lot of their managers and employees are probably getting used to too high wages," he said.
"If we do not tackle the issue of performance-related compensation and then we reward staff primarily financially for their contribution to overall profitability, I think there's a huge risk that all of this failed."
Analysts said any report recommendations in the report could involve regulating incentives and compensation.
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