In his interim report, Commissioner Hayne found the problem was not the laws but that the laws had neither been obeyed nor adequately enforced by the regulators.
“A lot of the misconduct occurred under laws that were already in place,” Mr Frydenberg said.
“The other was about the regulators and their ability to do better. They were too timid.
“And then there was the overall cultural issues where a lot of these businesses were used to putting profits before people, basic standards of honesty not being adhered to.”
Issues he expected to be raised by Hayne included fee structures, responsible lending, the role of regulators, and conflicted remuneration.
Competitive pressure
Mr Frydenberg also said the government needed, through its response, to ensure competition in the sector “because we don’t want to inadvertently strengthen the hand of the banks”.
The government has already announced a $2 billion loan facility for small business and, as AFR Weekend reported on Saturday, is expected to spare mortgage brokers and smaller lenders from any heavy-handed crackdown to maintain competitive pressure on the big banks.
Lending has slowed at the same time the royal commission has been under way but Westpac chief executive Brian Hartzer told the Financial Review the cooling in the housing market was not because the banks were cutting off credit amid the glare of the Hayne inquiry.
Figures released on Thursday by the Reserve Bank of Australia showed overall lending for the year ending December 2018 was 4.3 per cent, down from 4.8 per cent of the previous 12-month period in 2017 and below the 10-year average of 6.6 per cent.
Personal lending had fallen from 6.3 per cent in 2017 to 4.3 per cent, while business lending overall was up from 3.1 per cent to 4.8 per cent. But this overall number masked a slump in small business lending.
“The softening [in overall lending] was driven by softer business credit growth and a contraction in personal credit, while housing credit growth remained low but stable,” Goldman Sachs economist Andrew Boak said.
Citi economist Josh Williamson said lending growth was likely to slow further in 2019. “The decline is potentially related to tighter credit conditions around lending to smaller businesses that rely on their homes as collateral against business loans.”
Mr Frydenberg cited the data as another reason to protect credit flow, which he said was “the lifeblood ” of the economy.
Labor’s response to the royal commission will also be pivotal because if it wins the election it will be implementing the changes.
Shadow Treasurer Chris Bowen said the government could not restore consumer confidence given it had fought so long to protect the banks from the commission and only crumbled when its own back bench forced its hand.
“Only Labor can be trusted to rebuild Australians’ trust and confidence in the banking and financial sector,” he said.
Clean up super
“Labor also understands the critical importance the banking sector plays in the heart of the Australian economy – but that must not service as an alibi for bad banking conduct or criminality.
“We know that Scott Morrison never really wanted to call this ‘regrettable but necessary’ royal commission and now we know he was the last man standing in opposing a royal commission.
“Labor called for this royal commission, Labor fought for this royal commission, Labor will establish a Financial Services Royal Commission Implementation Taskforce, and Labor will work day and night to protect Australian consumers from this appalling misconduct.”
Mr Frydenberg said until he saw the report and studied it over the weekend, he could not say whether the government’s response on Monday would be preliminary or final.
Amid speculation the inquiry could incorporate some of the recommended changes to superannuation made recently by the Productivity Commission, the government will take into account the commission’s recommendations when it issues its response.
Retail funds came in for a hiding by the royal commission, especially over the excessive fees and poor returns.
This week, shadow Financial Services Minister Clare O’Neil gave a speech in which she promised Labor would clean up super. Mr Frydenberg said if Labor was serious, it would pass a raft of changes to super that have been stuck in the Senate since the budget last year designed to stop accounts with balances of $6000 and less being eroded by fees.
It proposes banning exit fees, capping administration fees at 3 per cent and automatically amalgamating low-value accounts held by the same person.
“It is ridiculous that Labor won’t pass this,” Mr Frydenberg said.
– with John Kehoe
from A Viral Update http://bit.ly/2MIKUwV
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