In response to the final report, Lawyers Weekly received comments from several law firms about the impact such recommendations will have if adopted.

Most of the commentary revolved around the big banks, with Slater and Gordon head of class actions Ben Hardwick saying the commission’s report comes as a “timely wake-up call” to the top end of town.

“The royal commission has exposed a financial services industry which has lost its way,” Mr Hardwick added.

“Time after time, some of Australia’s most trusted institutions have been found to have acted with naked self-interest, paying scant regard to their legal and ethical obligations. It has brought into the spotlight the many illegal practices in the banking, superannuation and financial services industry.

“If the government acts on all 76 recommendations, we are likely to see better outcomes for consumers over time. However, the provision of adequate funding to regulators to deliver the type of tough enforcement action called for in the report – in addition to a robust and healthy class action regime – is critical to the success of these reforms.”

Adding to this, Slater and Gordon principal lawyer Andrew Paull welcomed the report’s recommendation of a deferred sales model for add-on insurance products, including the sale of junk credit card insurance.

Evidence heard during the commission revealed banks were using “aggressive tactics” to push their most vulnerable customers, including the unemployed and those with a disability, into credit card insurance policies they either could not afford, or would never be eligible to claim against, he said.

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“Credit card holders already pay millions to the banks via fees and interest charges, before the additional strain of an insurance policy that they can’t even claim on.

“These policies were incredibly expensive and of little to no value, and while they were intended to cover credit card repayments in the event of serious injury or unemployment, banks have knowingly been selling them to vulnerable people who could not claim the major benefits.

“However, it is big business for the banks; $339 million was collected in consumer credit insurance premiums in 2017 alone.

“While we back the commission’s proposal to defer the sale of credit card insurance, we had hoped that the commission may have gone further and prohibited the banks from continuing to sell this low-value product,” Mr Paull said.

International law firm Clyde & Co also offered up its perspective on the recommendations made by Commissioner Hayne, reiterating that while the release of the final report brought much anticipation, its contents are suggesting more of an overhaul rather than a complete rewrite of Australia’s financial services industry.

“Despite some strong words of general criticism for the industry, the recommendations made by Commissioner Hayne are not the wholesale rewrite of the Australian financial services system that some had been predicting. The final report makes a large number of recommendations but by and large those recommendations are for change within the existing system rather than a complete restructure of it,” a statement from Clyde & Co’s website read.

“The final report makes specific findings in relation to the misconduct of entities that have appeared before the financial services royal commission, as well as broader recommendations for the financial services industry. There is also a call for stricter monitoring by regulators, which will now likely be highly scrutinised for their management of financial services misconduct.

“… The final report also addressed issues around culture, governance and remuneration within the financial services industry as a whole. Specifically, Commissioner Hayne recommended that APRA should give effect to the sound management of financial risk and misconduct in its supervision of bank remuneration systems, and that banks should conduct annual reviews of the design of remuneration for front-line staff.

“Regulators themselves have not escaped criticism, although Commissioner Hayne acknowledged that the ‘twin peaks’ model of financial regulation in Australia (i.e. APRA and ASIC) should be retained. However, he has called for ASIC to take a stronger enforcement approach, including using infringement notices for administrative failings only and rarely as an enforcement tool for large corporations. Overall, Commissioner Hayne recommends a new oversight authority for APRA and ASIC, independent of government, to assess the effectiveness of each regulator.”

In terms of what to expect now, the firm noted that while the final report has only just been made public, “there is little doubt that the commissioner's findings, recommendations and comments will give rise to further claims against financial services entities, in addition to those already on foot, as well as an increase in the enforcement activities of APRA and ASIC”.

“We can likely expect: increased claim activity (existing and new litigation, significant focus on misconduct of mortgage brokers and financial advisers, greater enforcement activity by APRA and ASIC, [and] generally, no immediate increase in regulation but a bolstering of the existing framework,” Clyde & Co said.

A statement from Ashurst echoed a similar sentiment to that of Clyde & Co’s in that it too suggested that while some changes will be felt across the industry, the final report will not prompt a complete refit of the current system.

“The final report of the Hayne royal commission is going to lead to significant specific legislative and policy changes across the financial services sector, including the expansion of the Banking Executive Accountability Regime and industry codes of conduct being used to set new legal standards. That said, it does not set the stage for whole new areas of regulation or a different regulatory architecture,” said Andrew Carter, dispute resolution partner at Ashurst.

“Big changes will be felt though with a tougher, more litigious approach to enforcement from ASIC, and, over time, potentially a simpler legislative regime with fewer carve outs and exceptions."

Meanwhile, MinterEllison and McCabe Curwood both stated that the aftermath of the royal commission will extend well beyond the financial services industry.

Minters partner and financial services industry leader Rahoul Chowdry, who welcomed the final report, said it “shone a piercing light on some unacceptable behaviour that has existed in the industry for a long time, including calling to account conflicts of interest – some of which have become institutionalised”.

“… The overarching message from Hayne is that we must embrace change: commit to changing the way we do business in Australia generally. The Hayne lessons extend beyond the financial services sector.”

McCabe Curwood managing principal Andrew Lacey noted: “The effect of the final report on the financial industry is obvious, but its aftershock will no doubt have resounding impacts on corporate governance beyond the financial sector”.

“The commissioner’s push for enforcing deterrence through the judicial system along with the government (and Opposition’s) support for the recommendations may result in the dawn of a new age of regulatory attention on corporate governance,” he said.

“The final report acts as a reminder for companies, and particularly directors, of the importance to monitor regulatory compliance and to avoid complacency about risk to ensure they avoid the ire of the regulator’s sharpened focus.”

INSIGHT: Alex Whitlock, director of Momentum Media, shares his views on what the royal commission means for Australian borrowers and competition.