Government announces a Royal Commission

Group Secretariat
Level 20, 275 Kent Street
Sydney NSW 2000 Australia
Phone +61 (0)2 8219 8990
Facsimile + 61 (0)2 8253 1215
www.westpac.com.au



30 November 2017


Market Announcements Office
ASX Limited
20 Bridge Street
SYDNEY NSW 2000


Dear Sir / Madam

GOVERNMENT ANNOUNCES A ROYAL COMMISSION INTO THE BANKING AND FINANCE SECTOR

Attached is a press release from the Federal Government announcing a Royal Commission into the banking
and finance sector.



Yours sincerely,



Tim Hartin
Company Secretary

UNCLASSIFIED


THE HON. MALCOLM TURNBULL MP
PRIME MINISTER

THE HON. SCOTT MORRISON MP
TREASURER


JOINT MEDIA RELEASE

Thursday, 30 November 2017
ROYAL COMMISSION – BANKS AND FINANCIAL SERVICES
The Turnbull Government will establish a Royal Commission into the alleged misconduct of
Australia’s banks and other financial services entities.
All Australians have the right to be treated honestly and fairly in their dealings with banking,
superannuation and financial services providers. The highest standards of conduct are critical to the
good governance and corporate culture of those providers.
We have one of the strongest and most stable banking, superannuation and financial services
industries in the world, performing a critical role in underpinning the Australian economy. Our
banking system is systemically strong with internationally recognised world’s best prudential
regulation and oversight.
Ongoing speculation and fear-mongering about a banking inquiry or Royal Commission is disruptive
and risks undermining the reputation of Australia’s world-class financial system.
The Government has decided to establish this Royal Commission to further ensure our financial
system is working efficiently and effectively.
Instead of the inquisition into capitalism that some have called for, the Royal Commission will take a
conventional, focussed approach. It will not be a never-ending lawyers’ picnic.
Our approach to banking and financial services reform has focussed on ensuring that our financial
system is resilient, efficient and fair.
We have moved to establish a new one-stop shop to resolve customer complaints; significantly
bolstered the Australian Securities and Investments Commission’s powers and resources; created a
framework to hold banking executives accountable for their actions; and acted to boost banking and
financial services competition for the benefit of customers.

We will ensure that the Inquiry will not defer, delay or limit, in any way, any proposed or announced
policy, legislation or regulation that we are currently implementing.
The Inquiry will consider the conduct of banks, insurers, financial services providers and
superannuation funds (not including self-managed superannuation funds). It will also consider how
well equipped regulators are to identify and address misconduct. It will not inquire into other
matters such as financial stability or the resilience of our banks.
This will be a sensible, efficient and focussed inquiry into misconduct and practices falling below
community standards and expectations. Most Australians are consumers of banking and financial
services, and we all have the right to be treated honestly and fairly by banking and financial services
providers.
Trust in a well-functioning banking and financial services industry promotes financial system
stability, growth, efficiency and innovation over the long term.
The proposed terms of reference will form the basis of the Letters Patent, terms of which will be
recommended to His Excellency, pursuant to the Royal Commissions Act 1902.
Media contacts:
Prime Minister’s office: Press Office, (02) 6277 7744
Treasurer’s office: Andrew Carswell, 0418 505 376
Kate Williams, 0429 584 675
Sonia Gentile, 0455 050 007

ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND
FINANCIAL SERVICES INDUSTRY

DRAFT TERMS OF REFERENCE
Context
Australia has one of the strongest and most stable banking, superannuation and financial services
industries in the world, performing a critical role in underpinning the Australian economy. Our banking
system is systemically strong with internationally recognised, world’s best prudential regulation and
oversight.
Most Australians are consumers of banking, superannuation and other financial services. The
superannuation system alone in Australia has created more than a $2 trillion retirement savings pool,
which continues to grow rapidly, and which compels all working Australians to defer income today for
their retirement.
All Australians have the right to be treated honestly and fairly in their dealings with banking,
superannuation and financial services providers. The highest standards of conduct are critical to the good
governance and corporate culture of those providers.
These standards should continue to be complemented by strong regulatory and supervisory frameworks
that ensure that all Australian consumers and businesses have confidence and trust in the financial system.
The Government will appoint a distinguished serving or former judicial officer to lead a Royal
Commission into the banking, superannuation and financial services industries.
The Commission’s inquiry will not defer, delay or limit, in any way, any proposed and announced policy,
legislation or regulation of the Government.
Terms of Reference
1. The Commission must inquire into the following matters;
a) the nature, extent and effect of misconduct by a financial services entity (including by its
directors, officers or employees, or by anyone acting on its behalf);
b) any conduct, practices, behaviour or business activity by a financial services entity that falls
below community standards and expectations;
c) the use by a financial services entity of superannuation members’ retirement savings for any
purpose that does not meet community standards and expectations or is otherwise not in the best
interest of members;
d) whether any findings in respect of paragraphs 1(a), (b) and (c):
i. are attributable to the particular culture and governance practices of a financial services
entity or broader cultural or governance practices in the industry or relevant subsector;
and

ii. result from other practices, including risk management, recruitment and remuneration
practices;
e) the effectiveness of mechanisms for redress for consumers of financial services who suffer
detriment as a result of misconduct by a financial service entity;
f) the adequacy of:
i. existing laws and policies of the Commonwealth (taking into account law reforms
announced by the Government) relating to the provision of financial services;
ii. the internal systems of financial services entities; and
iii. forms of industry self-regulation, including industry codes of conduct;
to identify, regulate and address misconduct in the industry, to meet community standards and
expectations and to provide appropriate redress to consumers and businesses;
g) the effectiveness and ability of regulators of a financial services entity to identify and address
misconduct by those entities;
h) whether any further changes to:
i. the legal framework;
ii. practices within financial services entities; and
ii. the financial regulators,
are necessary to minimise the likelihood of misconduct by financial services entities in future
(taking into account any law reforms announced by the Government); and
i. any matter reasonably incidental to a matter mentioned in the above paragraphs, 1(a) –
1(h).
2. In conducting its inquiry the Commission should give priority to matters which in its opinion, have
greater potential for harm if not addressed expeditiously.
3. Inquiring into the matters set out in paragraph (1)(f), the Commission:
a) must have regard to the implications of any changes to laws, that the Commission proposes to
recommend, for the economy generally, for access to and the cost of financial services for
consumers, for competition in the financial sector, and for financial system stability; and
b) may have regard to comparable international experience, practices and reforms.
4. However, the Commission is not required to inquire, or to continue to inquire, into a particular matter
to the extent that to do so might prejudice, compromise or duplicate:
a) another inquiry or investigation; or
b) a criminal or civil proceeding.

And, the Commission may choose not to inquire into certain matters otherwise within the scope of
this Inquiry, but any such decision will be the Commission’s, alone.

5. The Commission is not required to inquire into, and may not make recommendations in relation to
macro-prudential policy, regulation or oversight.
6. The Commission may submit to the Government an interim report no later than September 2018 and
must submit a final report within 12 months. The final report is to contain:
a) its findings; and
b) any recommendations relevant to the inquiry that the Commission thinks fit.
Definitions
financial service entity means an entity (other than a Commonwealth entity or company) that is:
a) an ADI (authorised deposit-taking institution) within the meaning of the Banking Act 1959;
b) an entity that carries on the business of undertaking liability, by way of insurance (including
reinsurance), in respect of any loss or damage, including liability to pay damages or
compensation, contingent upon the happening of a specified event, including:
i. a general insurer within the meaning of the Insurance Act 1973; and
ii. an entity undertaking life insurance business within the meaning of the Life Insurance
Act 1995.
c) a person or entity required by section 911A of the Corporations Act 2001 to hold an Australian
financial services licence or who is exempt from the requirement to hold a licence by virtue of
being an authorised representative; or
d) an RSE licensee of a registrable superannuation entity (as that term is defined in the
Superannuation Industry (Supervision) Act 1993) and any entity that has any connection (other
than an incidental connection) to the RSE licensee of a registrable superannuation entity.
Macro-prudential policy and regulation means policy and regulation, including as to the structure, role
and purpose of financial regulators, that is concerned with containing systemic risk, which can have
widespread implications for the financial system as a whole, beyond simply the banking system.
misconduct includes conduct that:
a) constitutes an offence against a Commonwealth, State or Territory law in relation to the provision
of a financial service, as existed at the time of the alleged misconduct; or
b) is misleading and/or deceptive; or
c) indicates a breach of trust or duty or unconscionable conduct; or
d) breaches a professional standard or a recognised and widely adopted (conduct) benchmark.

Contacts: Andrew Carswell 0418 505 376, Kate Williams 0429 584 675, Sonia Gentile 0455 050 007