Regulator ASIC has launched its final case coming out of the banking royal commission, closing the door on any more court action for banks that ripped billions of dollars from customers.
- ASIC says all 45 investigations were thoroughly investigated
- Twenty referred cases were “concluded with no further action”
- Legal experts predicted in 2019 that few cases would ever get to court
Almost half of the cases did not reach court.
When royal commissioner Kenneth Hayne’s final report came out nearly three years ago, it referred 13 cases to the Australian Securities and Investments Commission (ASIC) for investigation.
In addition, 32 case studies — tragic personal tales from the inquiry’s witness box — were examined to see if banks should face prosecution.
All up, that was 45 investigations. Only half got to court, with 20 “concluded with no further action”.
ASIC deputy chair Sarah Court said all 45 cases were thoroughly investigated — with examination of the evidence and notices compelling people to attend interviews — but some had insufficient evidence to launch a legal action in court.
“But I don’t think that means that bank customers or consumers should think, ‘that’s disappointing’, because a whole lot of those matters didn’t proceed,” she said, pointing to the difficulty of gathering information and the “evidentiary threshold” required to prove a matter.
Today’s final case encapsulates the decades-long systemic issues exposed by the Hayne inquiry in 2018.
The issues extend from the mid-1990s until three months ago, September 2021.
The benefits like fee waivers and interest rate discounts, affected 580,447 customer accounts and ANZ has had to repay nearly $200 million.
If the federal court agrees it is appropriate, ANZ will pay an additional $25 million penalty for the errors.
Predictions come true
Back in early 2019, when the royal commission’s final report was released, Helen Bird, senior lecturer in corporations law and corporate governance at Swinburne Law School, predicted that few of the referrals would ever get to court.
“There have been few, if any, real enforcement fights,” she said today, because banks and institutions like insurers have largely admitted they broke the law ahead of the proceedings.
Of the 13 referrals, six were dealt with in civil cases and only two became criminal cases led by the Commonwealth Director of Public Prosecutions.
Five of those are completed and three are ongoing, with a combined total of civil penalties hitting $79 million.
Add in the 32 case studies and the percentages do not improve.
Twelve civil cases, four criminal (one criminal brief still being examined) and 15 ending with no action. So far penalties total $31 million.
More penalties may be ordered but at this stage institutions have been fined $110 million. To put this in context, last year Australia’s big four banks made $26.8 billion in profit.
For Ms Bird, the bigger issue is the type of case taken on.
“For all the systemic failures observed by Commissioner Hayne, not one enforcement case has been brought against the management or board of the big financial service companies,” she said, with most of the court actions taken against companies.
The only actions taken against individuals are against those associated with smaller firms, such as financial planning minnow Dover Financial.
While the action has not generally been in court, banks have demonstrated change through the way they have dealt with the regulator, Ms Bird explained.
“With their backs against the wall, financial institutions have capitulated and co-operated with ASIC,” Ms Bird said, pointing to agreed statements of fact and expediting the court process to give the regulator some easy wins.
“Make no mistake, these wins were because they involved effectively no contest proceedings and the only discussion point was the size of the penalty orders to be made.”
What this suggests is that institutions dragged through the banking royal commission are anxious to get past it, and have softened previously combative attitudes towards regulators so that all can move on.
“Their previous (before the royal commission) hubris seems to be a thing of the past, demonstrating that there is some measurable efficacy to public hearings, daily humiliations and media exposure,” Ms Bird added.
Ms Court was previously at another watchdog, the Australian Competition and Consumer Commission (ACCC) and has expressed her unhappy astonishment to senior banking executives she has met in her new role about systemic failures like “fees for no service” (FFNS) that have stolen billions of dollars from customers over a period of decades.
“I’ve had pretty direct conversations about the fact that I find this staggering,” she told ABC News.
“I don’t think there’s any lack of attention to these issues at senior levels, is my sense. But I think we, the regulator, we need to keep calling this out, we need to keep taking these institutions to court, we need higher and higher penalties.
“I think the royal commission was obviously an extremely sobering period for the industry.
“Their attention to these issues, in my personal observation, is that I’m certainly seeing recognition at senior levels that these are significant issues.”
Some cases remain ongoing before the courts.