Australia vows to clean up financial sector after landmark misconduct inquiry

CANBERRA -- Australia's corporate regulators will be subjected to a new oversight body in a shake-up of the banking sector recommended by a high-powered independent inquiry into financial sector greed and malpractice.

The government-appointed inquiry known as a Royal Commission also recommended prosecutions for 24 cases of wrongdoing and advised that remuneration structures across the industry be overhauled to remove systemic conflicts of interest.

Authorities were urged to consider laying charges over behavior such as the charging of fees for services not rendered, including instances at major lenders Commonwealth Bank of Australia, National Australia Bank Ltd and Australia and New Zealand Banking Group.

The commission's recommendations were released by the government on Monday after the public inquiry heard 11 months of shocking revelations of wrongdoing which wiped A$60 billion ($43.5 billion) from the country's top finance stocks.

Misconduct reached into the sector's upper echelons, with top wealth manager AMP Ltd engaging in board-level deception of a regulator over the deliberate charging of customers for financial advice it never gave.

Firms were found to prey on some of society's most vulnerable customers, highlighted by the case of an insurer who used aggressive sales techniques to sell an opaque product to a young man with Down Syndrome.

"The price paid by our community has been immense and goes beyond just the financial," Australian Treasurer Josh Frydenberg said as the government promised to take action on all 76 recommendations.

"Businesses have been broken, and the emotional stress and personal pain have broken lives."

The recommendations also include banning trailing commissions for third-party mortgage brokers, forcing financial planners to disclose any fees they receive for selling products, and banning banks from charging default interest for farm businesses affected by drought.

Regulators also needed greater oversight after they were accused of working too closely with the banks. When misconduct was revealed, it either went unpunished or the consequences did not reflect the seriousness of what had been done, the inquiry found.

Australia's corporate regulator said in response to the report that it would prioritize serious matters referred to it by the Royal Commission for possible prosecutions.

BANK SHARES RISE

Ahead of the report's release, which came after the close of market trading in Sydney, shares in the "Big Four" banks closed up about 1 percent as investors looked forward to some certainty around the new regulatory framework.

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. The broader market closed 0.5 percent higher.

"The key macro issue we have been interested in is if this was going to further reduce the banks' willingness to lend, which would be a further headwind to the economy which is already under some pressure," said Andrew Ticehurst, a strategist at Nomura.

"At this stage, it does not appear to be the case. It would be a bit milder than expected."

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 report comes ahead of an election expected in May in which falling house prices could be a hot-button issue.

The conservative government, which for months defended the banks and rejected calls for an inquiry, is fighting for its survival with opinion polls suggesting an election victory for the center-left Labor party.

Labor says it expects to adopt all the commission's recommendations.

While Prime Minister Scott Morrison has also said he will take up the recommendations, he has warned against overreaching and cutting off credit flows.

FAIR GO

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

"That is, there remains a reluctance in some entities to form and then to give practical effect to their understanding of what is ethical, of what is efficient, honest and fair, of what is the right thing to do," the report said.

National Australia Bank Chairman Ken Henry came in for particular criticism after appearing dismissive during his public interrogation by the commission's barristers.

"I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues," Commissioner Hayne wrote, adding he was "not as confident as I would wish to be that the lessons of the past have been learned".

Australian Banking Association chief Anna Bligh said banks "accept full responsibility for these failings and they know that they must now change to ensure that this never happens again".

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

source: news.abs-cbn.com

'We failed them': Australia apologizes to child sex abuse victims

CANBERRA - Australian Prime Minister Scott Morrison issued a national apology to thousands of victims of institutional sex abuse Monday, admitting the state utterly failed to stop "evil, dark crimes" committed over decades.

"This was done by Australians to Australians, enemies in our midst, enemies in our midst," Morrison said in an emotional address to parliament, designed as a belated apology to the 15,000 known survivors of child abuse.

"As a nation, we failed them, we forsook them, and that will always be our shame," he said, recounting abuse that a government inquiry has shown was virtually endemic to schools, churches, orphanages, sports clubs and other institutions across the country over decades.

Morrison's voice cracked and trailed off as he recounted a history of exploitation, cover-ups and state failure. He declared a new national credo in the face for future allegations: "We believe you."

The state apology comes after a five-year Royal Commission that detailed harrowing child sex abuse claims involving once well-trusted institutions.

"Today, we say sorry, to the children we failed. Sorry. To the parents whose trust was betrayed and who have struggled to pick up the pieces. Sorry. To the whistleblowers, who we did not listen to. Sorry," Morrison said.

"To the spouses, partners, wives, husbands, children, who have dealt with the consequences of the abuse, cover-ups and obstruction. Sorry. To generations past and present. Sorry."

In parliament, lawmakers stood for a moment of silence following the remarks, as hundreds of survivors looked on or watched in official events across the country.

Outside the parliamentary chamber, relatives of victims who have died wore tags with the names of daughters and sons, brothers and sisters, for whom the apology came too late.

A series of Australian institutions have already apologized for their failings, including Australian Catholic leaders who have lamented the church's "shameful" history of child abuse and cover-ups.

According to the Royal Commission, seven percent of Catholic priests in Australia were accused of abuse between 1950 and 2010, but the allegations were rarely investigated, with children ignored and even punished.

Some senior members of the church in Australia have been prosecuted and found guilty of covering up abuse.

POWER OF APOLOGY

The Australian government has previously issued formal apologies for the mistreatment of Aboriginal Australians, for forced adoptions and homosexual convictions.

There are growing calls for an apology for the military's treatment of gay, bisexual and transgender personnel.

For many Australians there will still be questions about how the child sex abuse and cover-ups took place.

And for some of the victims, the government's atonement rings hollow -- a step short of removing public funding for offending institutions, or far-ranging legal reforms.

At an event attended by the leaders of both major political parties, protestors shouted demands that the government do more to punish the guilty and dig into the past of other institutions like the military.

"Today's apology to victims of institutional child abuse highlights the power of a public apology to heal past wounds," said Professor Noah Riseman of the Australian Catholic University.

"But in the midst of today's acknowledgement there was a reminder that other victims of institutional trauma remain unacknowledged."

arb/grk/sls

source: news.abs-cbn.com