Given that most commentators cheered and some grumbled about the reach of the interim report from the Hayne royal commission, you could probably conclude that Commissioner Kenneth Hayne got it pretty much right.

An interim report was never going to please everybody because in this case it’s all about what went wrong, most particularly in the bank lending and financial advice areas, and there’s a total absence of heads appearing on spikes.

That said, some organisations got a pretty substantial towelling up, most particularly the supposed twin peaks regulators, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.

As Hayne put it, “The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court.”

There are ways to punish miscreants other than via court action. But as Hayne wrote, ASIC went for what has long been called the ‘wet lettuce’ penalty approach:

“Little happened beyond apology from the entity, a drawn-out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct.

“Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that ASIC could properly have asked a court to impose.”

We already knew that but when a former justice of the High Court spells out in easily understood language what has really got up his nose, you pay rapt attention.

What rankled him was that once the big players realised they could arm wrestle and obfuscate their way to coughing up a financial penalty that was less than the profit they had made by doing the wrong thing, it was game over.

APRA will be getting quite a serve in the final report, too. I’d often wondered how a prudential regulator charged with keeping an eye on financial institution solvency was ever going to get dragged into a fight about consumers being ripped off but the charter makes it clear.

If anything, it puts consumers ahead of financial stability. Talking about the banks and insurers APRA oversees, it states: “These institutions currently hold approximately $6 trillion in assets for Australian depositors, policyholders and superannuation fund members (our ‘beneficiaries’). APRA supervision is aimed at protecting the interests of these beneficiaries and promoting the stability of the Australian financial system.”

It’s pretty clear.

Royal commission deja vu

As a veteran of the HIH Royal Commission of 2002, I can’t help noticing just how much this is a case of history repeating itself.  The two commissions seem to run in parallel in the area of ethics.