Following its review of misconduct of Australia’s financial services sector, the 1068 page Report from the Hayne Royal Commission was made public on 4 February 2019.
In line with his commitment to simplicity over complexity, issues such as fee for no service, vertical integration, responsible lending and executive remuneration are addressed by Commissioner Hayne, within the bounds of the existing regulatory framework. Put simply, he expects industry participants to apply and obey the spirit of the law and to be accountable for doing so.
The Report speaks to the fundamentals of how ethical business should be done; and it is a powerful reminder that the successful delivery of long-term sustainable shareholder value is about balancing appropriately the needs of different stakeholders.
The Report's recommendation to periodically assess (as often as is reasonably possible) organisational culture and governance is one example of the need to look beyond compliance and the law. Moreover, post-Hayne, a 'set and forget' approach is no longer acceptable.
“The recommendations provide an opportunity for our financial institutions to address not just the symptoms, but the root causes.”
The Commission has already engendered change and the Report will force even more changes in an industry where a thorough airing of some issues has been much needed.
Our financial services industry is, for the most part, the envy of the world. So while the Report will be the catalyst to drive out behaviour that has undermined the community's trust in the industry - ineffective governance, some poor conduct, conflicts of interest, and inappropriate business and remuneration models - it will also help to support, extend, and solidify all that is already working.
Boards and management thus have an opportunity to play 'leap frog' by being bold and ambitious – rather than incremental – in their reform agendas. Fundamental to this is accelerating much needed investment in systems, processes, data and controls to help manage non-financial risks in a clear and effective way. Indeed, it is our strong belief that using data strategically in this way will define future winners.
“The Report of the Hayne Royal Commission is essentially a ‘once in a lifetime’ opportunity to drive future success for the Australian financial services sector through a renewed focus on the areas of trust and governance.”
MinterEllison has prepared its own perspectives on the Hayne Report in order to provide key thought starters and questions. Our specialist team, consisting of lawyers, risk and compliance professionals, data experts, bankers and consultants, provides a unique perspective on the immediate challenges and implications for your organisation to consider. We have outlined what we see as the important strategies that will enable financial services organisations, financial institutions and organisations in other industries to restore community trust.
We invite you to read our Report and to join us in a conversation. Our firm looks forward to engaging with you about Hayne and the way forward.