Australian banks heal their wounds following a malpractice investigation

SYDNEY (Reuters) – An investigation revealing greed and wrongdoing by leading Australian banks and wealth managers is closing this week ahead of a final report that could trigger a major reform of the sector. of the 12 largest economies in the world.

Initially rejected by the ruling Conservative party as a "populist blunder", the quasi-judicial investigation known as the Royal Commission's investigation revealed a misconduct of the branch at the council chamber that will result in almost certainly a more severe regulation.

In 69 days of hearing, the investigation heard shocking stories of shameless scams, customer abuse and even loss of money. The final hearings are scheduled for Friday.

During one hearing, the commission's lawyers broadcast the registration of a life insurance salesman calling a man with Down syndrome and persuading him to sign up for a policy which he did not need or that he did not understand. When the man's father tried to cancel the police, the company refused until the father asked his son to ask for the cancellation himself.

In another, a blind, partially deaf retiree reported being taken to a bank branch and handed over "pre-filled" documents to secure his daughter's activity. In case of bankruptcy of the company, the bank attacked the home of the pensioner.

The largest wealth manager in the country, AMP Ltd (AMP.AX), admitted to falsifying an allegedly independent report to a regulator about how he had charged thousands of customer fees without providing service. Investigators have suggested that such fraud is criminal and that Commissioner Kenneth Hayne's latest recommendations could be prosecuted.

"What happened to us has always been considered immoral, but I did not know what they had done was not legal," said Ross Dillon, who testified at the investigation that the proceeds of the sale of his house had been diverted by his bank. Reuters.

Investors wiped out about 40 billion dollars ($ 29 billion) from the market value of the four largest Australian banks and AMP during the nine months following the survey and some analysts said Expect further decline in response to official recommendations to be received by 1 February.

Reputation and financial costs are accumulating and reducing the margins of some of the most profitable banks in the world.

The Top Four Lenders – Commonwealth Bank of Australia (CBA.AX), Westpac Banking Corp. (WBC.AX), Australia and New Zealand Banking Group Ltd. (ANZ.AX) and National Australia Bank Ltd (NAB.AX) – and AMP have promised to repay A $ 1.3 billion to their injured clients.

The CEO of the Commonwealth Bank resigned during the investigation, as did the CEO, the President and three directors of AMP. The Commonwealth Bank has since fired 41 staff members for misconduct and removed $ 100 million in bonuses. In the industry as a whole, hundreds of employees have lost their jobs.

"Banks will have to pay more, and it will not be profitable because the product will be in compliance," said John Guadagnuolo, investment manager at Antares Capital.

"There is a problem of culture, recruitment, remuneration and I am not sure that the banks themselves know how to fix it."

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Public outrage will prevent the government from ignoring the commission's final recommendations, as most polls show that it is losing an election scheduled for May.

Banks have anticipated some recommendations by tackling consumer credit practices, removing executive bonuses and abandoning non-core business. Any statutory limit on premiums would put Australia at the forefront of international restraint on extravagant executive pay.

Australian banks have also begun to unclog their once-fashionable "vertical integration" models, which, according to the survey, created conflicts of interest for financial advisors.

Pension funds have begun to cancel rollover fees known as trailing commissions – deducted from clients' accounts over many years, regardless of the service provided – in anticipation of their prohibition.

Although Britain has banned financial planners from taking trailer commissions sold since 2013, a total ban in Australia would be even more severe.

Australian regulators are also under pressure to be tough, after being shy and reluctant to take tough action against criminals.

The Australian Securities and Investments Commission, the corporate watchdog, has already filed lawsuits against each of the "Big Four Banks" and AMP this year, as a sign of dynamism.

(This story corrects the Commissioner's name in the sixth paragraph)