What to expect from the Hayne royal commission report, in an at-a-glance guide from one of Australia's top banking analysts

ScreenshotKenneth Hayne

Today is a pivotal day for Australia’s banking industry, with the final report of the Hayne Royal Commission to be released at around 4pm just after the market closes.

The inquiry itself has already re-shaped financial services with its exposure of failings across the industry — from practices in front-line sales floors of insurance companies and business lending departments all the way up to administrative practices at board level in the major banks. The sheer weight of increased scrutiny has been forcing a re-evaluation of behaviours and practices, most spectacularly evidenced in the major banks offloading their wealth arms but also in the general tightening of credit which now poses a risk to the economy.

One of the surprises in the interim report released last year was the extent of its criticisms of the regulators, mainly ASIC but also APRA, for failing to enforce existing laws to their fullest extent. The banks, as one analyst put it at the time, “got off lightly”.

The commission’s final report is expected to contain a list of recommendations for various banking sector interventions, some of which will involve new legislation or recommendations on the activities of the regulators. What those recommendations will be shall remain a mystery until later this afternoon and after that, whether all of its recommendations are accepted will be a matter for whoever’s in government after the election (although Labor has promised to implement it in full if elected).

Certain elements regarding the regulators may simply be able to be enforced or implemented immediately using their existing powers. Regardless, the recommendations will be sweeping and far-reaching, given the array of issues canvassed in the public hearings.

From Jonathan Mott — the banking sector analyst at UBS in Sydney who is widely regarded as one of the sharpest — and his team, here’s a quick summary of what he expects among the key recommendations, sorted into four categories: remuneration, remediation, regulation, and responsible lending.

UBS Research

One of big questions from the perspective of the overall economy is the capacity of the recommendations to lead to a further tightening of credit in the short-term. The difficulties in getting loans for mortgages are well-canvassed, but there is a risk that this is now spilling into small business lending. Part of this is, again, a result of the sheer weight of scrutiny, with the banks having been hesitant about all aspects of their business, especially lending practices, while the commission has been in motion.

At least from today there’ll be some more clarity about what the new era will look like.

We’ll have coverage of the report when it’s released shortly after 4pm.

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