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What are the key themes in the Final Report of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry?

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The final report (the Report) of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission) was released on 4 February 2019. The Report provides 76 specific recommendations to the Government, the financial sector, and financial regulators to redress the misconduct revealed by the inquiry. These recommendations reflect the conclusions the Commissioner reached in respect of the questions he posed in the interim report published on 28 September 2018 and based on further work undertaken by the Royal Commission.

The Report primarily focuses on financial services entities operating in retail markets. Strong criticism is made of the historical and on-going misconduct of mortgage brokers and financial advisors. Most of the recommendations target these actors but other financial services entities need to take note of the recommendations. No recommendation is made to end vertical integration of financial product manufacture and financial advisory/wealth management units, as some commentators had feared. In the Commissioner’s words, “I am not persuaded that it is necessary to mandate structural separation between product and advice”. However, the Report notes that most Australian financial institutions have been (or are) divesting their wealth management arms.


Notwithstanding this lack of structural market reform, the Commissioner makes a series of recommendations with implications for financial services entities.
While there is significant material on which to comment arising from the Royal Commission’s 76 recommendations, we focus in our detailed publication on four areas of interest:

  1. Conduct, culture and governance (the focus and explanation for the poor conduct that led to the Royal Commission);
  2. Conflicts of interest and professionalism (particularly in the context of financial advice and advisers);
  3. Remuneration structures (following on from, and to help address, issues of conduct, culture and governance and conflicts of interest);
  4. Regulation and the regulators (particularly the need to strengthen regulatory oversight).

Responses to the Report

In its response to the Report, the Australian Federal Government (the Government) stated that: “misconduct must end and the interests of consumers must now come first. From today the financial sector must change, and change forever.”

Whether the Government’s and financial sector’s response to the Report ultimately results in such a fundamental change remains to be seen.
The Australian Prudential Regulation Authority (APRA), as well as the Government, have replied to the recommendations in the Report and already detailed some of their proposed actions.

Global impact of the Report

Financial institutions with a presence in Australia, including banks and other intermediaries with branches or subsidiaries in Australia, will need to assess how this Report and the subsequent response will affect them. Globally, the impact of the Report is already being felt as regulators, including for example the Hong Kong Monetary Authority, cite the findings of the Royal Commission in their own bank culture reform initiatives.

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