The likely recommendations from Australia’s investigations are changes that should have been made years ago.

The early skirmishes in Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry suggest that banks are not in for an easy time. 

The tone was set in March when Rowena Orr QC gave two banks, Commonwealth Bank and National Australia Bank (NAB), a firm dressing down for failing to do their homework properly in the submissions they were required to lodge. 

In a tone worthy of the sternest headmistress, she told off NAB for “failing to grapple with the task” it had been set. 

The whole thing will be a public relations nightmare for the banks, but where ultimately is it taking us? 

The bulk of what’s under scrutiny is at the retail end of town in the name of individual customer protection: bad financial advice, denial of legitimate insurance claims, fee gouging and rewarding staff for selling clients into their own products. 

The early days of the inquiry have focused on bonuses that have encouraged inappropriate mortgage sales, with one early revelation being that 15% of NAB’s mortgages carry waivers, meaning they do not comply with all the standards in the bank’s own lending policy.

The commission will likely change the way bankers are remunerated for sales of personal finance products (which has already undergone considerable revision in the last 10 years anyway, from mutual funds to life insurance). 

Strong powers

Royal Commissions have strong powers when it comes to things like demanding documents – or subpoenaing them, if it comes to that – or issuing a search warrant. They can even jail people who do not attend or refuse to answer questions.

But in terms of the end outcomes, the most likely thing will be recommendations for changes in selling processes that banks should have made years ago and won’t hurt them particularly when they do.

At the wholesale end of town, all the action is happening elsewhere, in the federal court, where the Australian Securities and Investments Commission (Asic) is trying to prove CBA manipulated the bank bill swap rate. The troves of emails, phone transcripts and instant messages that are steadily being lodged by Asic with the court are providing plenty of ammunition for those who believe banking hasn’t changed one iota from the ‘Wolf of Wall Street’ bravado of days supposedly past. 

But even if proven, whatever penalty is levied upon CBA – and Westpac, which also went to court in its own defence but at the time of writing is still awaiting a judgement – will not dent the banks’ profitability. 

Instead, this is all a reputational disaster and it will take years for the industry to regain public trust.