Economy

Australia vows to clean up financial sector after landmark misconduct inquiry

Australia vows to clean up financial sector after landmark misconduct inquiry

The Australian government is due to release on Monday the final recommendations of the independent inquiry that exposed systemic wrongdoing in Australia's financial sector previous year, likely leading to sweeping changes to the country's banking industry.

The Royal Commission final report has been released to the public and outlines recommendations from Commissioner Hayne.

So with that strong market reply from investors yesterday it's no wonder that CEO Andrew Thorburn and Chairman Ken Henry yesterday rejected criticism of them and their attitudes in the appearances at the royal commission from Commissioner, Ken Jayne in his final report.

Shares in National Australia Bank (owner of BNZ) - which was widely considered to have been singled as worst offender by the Commission - have risen 3 per cent.

Hayne's recommendation that mortgage broking be moved fully to a fee-for-service model in which borrowers would pay brokers, not the banks, has too many people anxious - not just mortgage brokers, but people concerned about banking competition.

NAB's shareholders delivered the biggest ever "no" vote on the bank's remuneration at the annual meeting last a year ago.

The report also said that mortgage brokers should be under the same rules as financial advisers: "After a sufficient period of transition, mortgage brokers should be subject to and regulated by the law that applies to entities providing financial product advice to retail clients".

Citi analysts said it was the "best possible set of recommendations given the circumstances that the sector could have reasonably expected", while Moody's ratings agency said it was "unlikely to alter the favourable structure of the banking industry".

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"It's a scathing assessment of conduct driven by greed, which fell far below community expectations", Treasurer Josh Frydenberg said.

However, wealth managers, whose reputations were shredded in the inquiry, were punished with IOOF Holdings Ltd stock closing down 4.5 percent and AMP sliding to a record low.

Fallout from the Royal Commission has already prompted banks to tighten lending practices in their core mortgage businesses, contributing to some of the biggest housing price falls in a generation.

The government is fighting for its survival with opinion polls suggesting an election victory for the centre-left Labour party.

"I respect the commissioner's view. but I don't share it", Mr Thorburn said in a televised interview.

The report from Hayne, a former High Court justice, found that the industry's problems were exacerbated by an unwillingness to accept responsibility.

Thorburn appeared in back-to-back interviews on Tuesday morning to push back against Hayne's conclusion, telling Sky Business the commissioner was wrong in his characterisation of both him and NAB's chair, Ken Henry. "The Board and I have reflected deeply on those and other issues and, as I have said previously, we take them very seriously".

"Banks are determined to learn the lessons, to fix the problems and to make it right", she said.