Day 421: 'Some really bad things have happened'
Counting the days since the banking royal commission was established.

Good afternoon, and welcome to day 421.
Today in summary: A capability review of financial regulator APRA is pushing ahead; the Senate will have its first opportunity tomorrow to vote on one of Commissioner Hayne’s 76 recommendations; National Australia Bank’s acting chief executive Phil Chronican will oversee reform and board change, but shareholders are baying for blood; and Bendigo and Adelaide Bank today announced a flat after-tax profit of A$203.2 million for the first half of 2018-19.
-- Alex
@AlexESampson
Current banker panic level: 😡😭
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1. The Coalition is pushing ahead with a capability review of financial regulator the Australian Prudential Regulation Authority, following the release of the banking royal commission final report. The federal government has agreed to conduct regular capability reviews going forward and to a capability review of APRA commencing in 2019. An expert panel that will lead the APRA review will include chair Graeme Samuel AC, Diane Smith-Gander and Grant Spencer. In his final report, Commissioner Hayne recommended a review, in line with previous advice from the Productivity Commission in its final report, handed down in December 2018. APRA said in a statement today it was committed to “expeditiously” implementing the royal commission’s recommendations.
“There are 10 recommendations requiring APRA’s direct attention. Of the 10, it is expected that nine will be completed by the end of 2020; of those, four are expected to be completed in 2019,” APRA said in a statement.
You can read APRA’s implementation plan here.
2. The Senate will have its first opportunity tomorrow to vote on one of Commissioner Hayne’s 76 recommendations. The royal commission highlighted millions of dollars in conflicted remuneration were still being paid in return for no financial advice. The AFR reports that a plan by Centre Alliance Senator Rex Patrick to end grandfathered payments looks likely to win support from Labor in the Senate. Senator Patrick said his compromise plan was a realistic middle ground and would help parliament move quickly to vote on recommendations. This comes after Defence Minister Christopher Pyne said on Sunday that Hayne’s 76 recommendations would require at least 40 pieces of legislation that could not be rushed and expected nothing to be addressed until after the May federal election.
3. National Australia Bank’s acting chief executive Phil Chronican has a “big agenda” of reforms to oversee, in addition to the search for a permanent chief executive. Mr Chronican said NAB was also focused on board renewal, following the resignations last week of chief executive Andrew Thorburn and chairman Ken Henry. Future Fund chairman and former federal treasurer Peter Costello today said Henry should not be the one to appoint the new chief executive.
"If the NAB was managing itself well, what it would do is the chairman would go first and then a new chairman would come in, and would appoint the CEO."
Shareholders have said the senior executive changes were unlikely to fuel enough improvement in the bank’s culture, with NAB shareholder Simon Mawhinney saying NAB would need to “do a lot more than appoint a handful of new leaders” to regain trust.
"That is not to say that NAB's moral compass is broken, or misdirected more than any other bank, but some really bad things have happened. Culturally I just think the whole banking community attracts or turns people into profit-maximising beasts."
4. Bendigo and Adelaide Bank today announced an after-tax statutory profit of A$203.2 million for the first half of the 2018-19 financial year. The weaker first-half result comes amid backlash from the Hayne banking royal commission final report. Australia’s fifth largest retail bank saw its cash net profit fall 2.4% to A$219.8 million for the six months to December 31. But managing director Marnie Baker said the results demonstrated “strong customer loyalty and increasing customer growth, despite a challenging operating and external environment”. Baker come out strongly against the recommendations of the banking royal commission, calling on the government for pro-competition initiatives:
“Whilst the royal commission final report makes strong industry-wide recommendations to improve customer outcomes, little goes to the issues of competition and a level playing field, something many inquiries cite as being essential to better customer outcomes, and a point we’ve made for years.”
Today’s burn prize: InvestSMART editor in chief Alan Kohler
🔥🔥🔥
“Anyone who goes into a broker’s office thinking they’re getting unconflicted advice that is in their best interests really must have come down in the last shower.”
Kohler argues that Australia should ditch mortgage brokers altogether, rather that fussing about whether or not their commissions are acceptable.
The Commentariat
Former Reserve Bank and APRA advisor David Lewis investigates in the Australian Financial Review whether there is more to trailing commissions than meets the eye. He argues that trailing commissions, rather than being “money for nothing” – as Commissioner Hayne accused them of being – are actually ongoing incentives for mortgage brokers to act in the best interests of both banks and borrowers.
“If there is a concern with the growth of mortgage brokers, it has never been with the fact that they are paid on commission. Rather, any concerns with broker-originated lending has centred on whether these loans genuinely align with customer needs and whether they adhere to prudent lending standards.”
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