A lot of water has gone under the bridge since Prime Minister Scott Morrison criticised a royal commission into banking as a "populist whinge" unnecessary because “we have a tough cop on the beat called ASIC and ... a strong regulator called APRA”.
Morrison, as Treasurer, warned that a royal commission would undermine a key pillar of the Australian economy. He wasn’t alone. Lobby groups, banks and various media also pilloried the idea.
While Labor continues to push for a royal commission into banking the Treasurer remains unconvinced. Vision ABC News 24/Sky.
Despite the fear mongering, the economy hasn't fallen apart. Instead, some egregious and systemic behaviour has been put on show.
So bad has the behaviour been, Morrison and many others have eaten their words and apologised for getting it so wrong.
What has been uncovered by the Hayne royal commission on the fees for no service scandal is tantamount to institutionalised theft. Then there is systemic over-lending, entrenched underperformance of retail superannuation funds (largely due to fee gouging and conflicts of interest), life insurers behaving badly, spying on the mentally ill, insurers such as CommInsure selling policies underpinned by outdated medical definitions that were then used to deny legitimate claims, dodgy financial advisers flogging high fee paying inferior products and a massive failure of regulatory oversight.
In the latest round on general and life insurance, which concluded the commission was open to finding a litany of breaches of the act, misconduct, misleading and deceptive advertising and a flagrant disregard for customers and external dispute resolution schemes.
TAL, Freedom, ClearView and Commonwealth Bank's CommInsure, represented by its boss Helen Troup, are all in the gun for various acts of misconduct.
CommInsure, which had already been investigated by ASIC and received little more than a slap on the wrist, was shown to have been motivated by commercial considerations and a "troubling lack of respect" for the Financial Ombudsman Service, something Commissioner Kenneth Hayne suggested could in itself constitute misconduct including a breach of contract.
Its systemic sale of trauma policies with old medical definitions may have criminally breached the law. The list of misconduct goes on.
But what has become obvious is the regulators, institutions and lobby groups that are supposed to be the custodians of the sector's standards have failed millions of Australians by failing to address the problems.
In the quest to make a profit and meet targets and earn bonuses, institutions behaved badly, and the regulators were asleep at the wheel.
As the royal commission prepares its draft report, speculation is rife about what might be included in the recommendations. Will it focus on sector reform or call for prosecutions and fines? It is likely to be a bit of both.
Will it recommend the removal of grandfathered commissions? If it doesn't, it should. Will it suggest industry codes of conduct be mandatory instead of voluntary? After the Financial Services Council described obligations under the life insurance code as "aspirational" and not easily translated into law, that should be a given.
Other areas to consider include vertical integration and how to address the inherent conflicts of interest.
At the centre of it all is the regulators and how to get them to do a better job.CommInsure boss Helen Troup at the royal commission.
Photo: Eddie Jim
Beefing up of the powers and resources of the regulators is obvious but something more draconian is required such as structural change as well as a body that oversees the regulators.
The fallout from the royal commission has already been profound. Some institutions have sold or flagged the sale of their life insurance arms and financial advice arms in an attempt to unwind the vertically integrated model and simplify the business.
Others have closed down divisions, deleted products, changed remuneration structures and tightened lending criteria.
At a granular level there has been some change at the top. The board and senior management ranks of AMP, including its chair Catherine Brenner, have been overhauled, NAB has lost senior executive Andrew Hagger and others are sprucing up their resumes in preparation for the inevitable axe to fall.
Andrew Hagger: Accepts responsibility for NAB's wealth management failings. Photo: Fairfax Media
Even independent experts have been put on notice as the smell of the so-called “independence” of their reports lingers.
After the royal commission releases its interim report the banks will have a couple of weeks to grapple with its implications – as well as test the political winds. They will then front the final round of the royal commission for a grilling on policy.
The commission has put the spotlight on a sector that for years has hidden rampant misconduct in plain sight. It has been a secret that has cost Australians a fortune. In too many cases it has destroyed lives and smeared those who tried to speak up, including brave whistleblowers such as Dr Ben Koh and Jeff Morris and the many who remained anonymous.
If there is a criticism it is that reviewing such a complex sector in too short a time makes it impossible to make a proper fist of it.
Things get missed, complicated issues glossed over and too many individual and institutional wrongdoers slip through the net. For the many victims who hoped to tell their stories, time ran out and most never got called. For them, their stories will never be told and closure may never come.
Adele Ferguson is writing a book, Banking Bad, on the royal commission and the scandals behind it.This article was first published by https://www.smh.com.auAuthor: Adele Ferguson comments on companies, markets and the economy.