Professor Michael Adams

'Key Lessons from the Banking Royal Commission'

The recent Royal Commission into Misconduct in the Financial Services Sector (Banking) was led by former High Court judge, Kenneth Hayne AC QC. This is why it is commonly referred to as the Hayne Royal Commission. This Royal Commission is different to many others as it covers such a large industry.

nterestingly the recommendations which have come out of the Commission will not change the existing law. Instead the findings endorse the model adopted in 2001 by the Financial Services Reform Act (Cth). It is probable the recommendations will help to strengthen the role of regulators whilst focusing on governance and culture. Professor Adams notes the ‘biggest surprise about the findings was ‘the attack on mortgage brokers and the removal of trailing commissions.’ He relays ‘many of the recommendations are sensible and return to basic principles of law which have been established for centuries.’

At his public lecture on the 27th March, Professor Adams will explain the practical consequences of the recommendations. These include aspects such as the probable tightening of credit which will be compounded by the slowing of the housing markets. In other words it is likely the recommendations will impact on first home buyers and limit the amount people can borrow from banks. The positive aspects of these reforms is that there will be less of a risk people will incur mortgage stress.

In terms of the impacts the reforms will have on farmers, these will be largely positive as well. The report has recommended a National Mediation Scheme. The recommendations state that banks should be represented by an experienced agricultural land specialist. This will allow a mediation to occur between farmers and a banking representative who actually understands what farmers are facing. Another of the recommendations is that penalties towards farmers will be removed in times of natural disasters. Overall, foreclosure on the farmers will be a last resort and the process will attempt to determine what is in the best interests of both the farmer/s and the bank.