Following a series of scandals, the royal commission, which issued 76 recommendations, calls for increased control of financial institutions.

By Isabelle Dellerba Posted on February 05, 2019 at 08h52 – Updated on February 05, 2019 at 08h52

Play Time 3 min.

In front of an agency of the Australian bank Westpac, Melbourne, February 4. In front of an agency of the Australian bank Westpac, Melbourne, February 4. WILLIAM WEST / More BankReal estate and life insurance fraud, advice contrary to the interest of the customers, expenses taken from dead persons … The report of the commission of inquiry on the abuses perpetrated by the Australian banking sector threatened to be so explosive that the authorities had announced its publication after the closing of the Sydney Stock Exchange, Monday, February 4.

Finally, the investors were relieved. The royal commission, which investigated for nearly a year on these dysfunctions did not recommend a big bang of the legislation, but rather a better application of the existing laws. As of Tuesday, February 5 in the morning, the titles of the major banks were up sharply, despite the very strong speech of the Australian Minister of Finance.

"The banking sector must now change and change for good "Monday, Josh Frydenberg, who called the report"Damning". After examining 10,000 complaints, and hearing 134 witnesses, the commission, created in late 2017 following a series of scandals, pinned in an interim report the "Greed" of the financial sector, denounced a culture strongly "Sales-oriented" having resulted in "Substantial losses for many customers, but generated a substantial profit for the companies involved". The four largest Australian banks, which hold 80% of the local mortgage market, are among the most successful companies in the world.

"The report does not tackle the basic problems"

Commission Chair Kenneth Hayne made 76 recommendations to fundamentally change industry practices, including the review of a multitude of regulations and more controls. Scott Morrison's Conservative government has announced that it will take action to address all of the recommendations.

"I regret that the report does not address the underlying problems, including the restructuring of the banking sector. It nevertheless has the merit of having highlighted the abuses of which consumers are victims "says Warren Staples, professor of management at RMIT University.

Among the main recommendations, many are aimed at mortgage brokers. These professionals, considered independent and solicited in more than half of transactions, are supposed to guide borrowers to the most advantageous banking offer. During the hearings, the Australians discovered that they received commissions from the banks for the subscription and others, proportional to the amount and duration of the credits subscribed, which encouraged them to push their customers to to go into debt beyond what is necessary. To get their share of the pie, the less scrupulous have produced false documents, such as job letters, the only coins required by the Westpac Bank to grant mortgages. Deception proved all the easier as the items provided were rarely checked.

Legal proceedings envisaged

Another key issue: the billing of non-existent services, including consulting fees to deceased customers. The fraud has reached a colossal magnitude estimated at 850 million Australian dollars (nearly 540 million euros). The commission seized the regulators. Several companies and individuals could be subject to civil and criminal prosecution. In the pensions and insurance sector as well, legal proceedings are envisaged.

On this aspect, the survey revealed the existence of pension funds "Ridiculously weak", even non-existent, or predatory behavior towards vulnerable people, such as the sale, to a trisomic, of a insurance policy by telephone. The government has promised more regulations, controls and sanctions.

"The report does not call for an overhaul of the law, but it is fair, in that it is hard on those who break the law", says Brett Le Mesurier, financial analyst. Experts feared that too harsh conclusions prompt banks, which have already tightened their credit conditions, to take more drastic measures, which could have led to a slowdown in the economy already weakened by the fall in prices. real estate. With legislative elections scheduled for May 18, it will be up to the next majority to pass the promised reforms.

Isabelle Dellerba (Sydney, correspondence)

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