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Australia was beset by a series of scandals in the financial sector for over a decade until former Prime Minister Malcolm Turnbull established a Royal Commission in December 2017. Our experts help to understand what鈥檚 happened so far, and what to expect from the interim report due out later today.

1. What brought about the Banking Royal Commission?

Former Prime Minister Malcolm Turnbull appointed the as Commissioner. Starting with the ANZ Opes Prime Scandal in 2009 where the bank paid millions in settlement, a series of incidents involving Australia鈥檚 big four banks followed.

鈥淲hen a small handful of large financial institutions are providing financial services and cross-selling to many retail customers within a domestic financial system, trust evaporates quickly when scandals hit again and again,鈥� explains , University of Sydney Business School.

The Royal Commission exposed the widespread failures to act in the best interest of members, explains Professor Susan Thorp, Univeristy of Sydney Business School, with 鈥渃onflicting incentives operating on trustees and managers. These failures have included charging advice fees when no advice service was delivered and taking excessively long times to transfer members to low-cost default (MySuper) funds.鈥�

2. What has happened so far?

There have been five public consultations, with 8,977 public submissions received of which 63 percent refer to the banking industry and the main nature of the dealings around personal finance.

The information-gathering over the past 10 months has revealed stories of everyday consumers involving bankruptcy, loss of family and even homelessness.

Associate Professor Eliza Wu said the key problems identified in the Commission are 鈥渃oncentrated in the consumer finance and superannuation services. When a small handful of large financial institutions are providing financial services and cross-selling to many retail customers within a domestic financial system, trust evaporates quickly when scandals hit again and again.鈥�

3. How have consumers been affected and will there be fair recompense?

鈥淪o far the Royal Commission has shown consumers have lost faith and trust 鈥� rightly so 鈥� in the Australian financial system. Some of the biggest issues include the lack of transparency, regulation and competition,鈥� says , University of Sydney Business School.

However, , University of Sydney Business School,聽highlights a culture of blame has been perpetuated with 鈥淐onsumers are the weaker party in transactions with financial services firms. We should hear less about consumers being responsible for reading disclosure documents and their own financial literacy and more about firms truly exercising duty and responsibility towards each individual consumer.鈥�

鈥淭he inquiry鈥檚 lid-lifting on the breadth and depth of conniving practices buried in small print, or worse, deliberately hidden from customers by artful deception, has shocked Australians out of their complacency,鈥� added , University of Sydney Law School.

4. How will the banking and finance sector authentically regain trust?

With threats of falling house values in Australia and potential for a second global financial crisis, there鈥檚 concern that already beleaguered households will continue to bear the brunt of the financial sector negligence.

Numerous areas need to be addressed by the whole sector argues Associate Professor Shumi Akhtar: 鈥淲e need to improve disclosures and break down of fees for the superannuation funds. We need APRA and ASIC to have non-overlapping responsibilities for both Banking and Superannuation fund management.

While Professor David Kinley believes the sector has to work hard to win back its customers and, more importantly, their trust: 鈥淭his first line response has been predictable. What banks and other financial institutions do next, however, is what really matters. Fig-leaf reforms will not cut it with ordinary folk and our poll-driven politicians. 鈥楶utting people above profit鈥� sloganeering rings not only hollow these days, even decidedly deceitful.

It鈥檚 clear that governanance needs to be addressed and has figured highly in submissions to date. Says Professor Gail Pearson: 鈥淭his is no longer a question of 鈥榗ulture鈥�, nor a question of 鈥榬estoring trust鈥�. The financial institutions must fundamentally change the way they do business. They should reconsider their governance practices, eradicate conflicts of interest from top to bottom and reform their remuneration structures.鈥�

5. What are the likely outcomes or recommendations from the interim report?

suggests that regulators need to act to disentangle conflicted incentives and ensure that trustees鈥� responsibilities to members are given first priority. 鈥淭his will likely mean those who have failed in their duty are penalised,鈥� she says, suggesting that punitive measures will likely be suggested by the Commissioner.

As Professor Gail Pearson goes on to say, 鈥淲e need more competition in the financial services system on the basis of fair and dutiful treatment of consumers, and less on the basis of market share captured by the bad practices exposed in the Royal Commission.鈥�

The remuneration and governance structures of our institutions need to be addressed, argues Associate Professor Eliza Wu.

鈥淎ustralian financial institutions will have to work very hard to regain the trust of the public and to rebuild much goodwill with the 鈥榳arts and all鈥� that have been uncovered as part of the Royal Commission into Misconduct in Banking, Superannuation and Financial Services industry. The remuneration structure and service charges within the financial services industry must change going forward to help to restore trust within the entire sector.鈥�

鈥淎ustralia has the world鈥檚 most profitable banks 鈥� but at whose expense? 鈥� has never been a more pertinent question, and a seriously adequate answer never more demanded,鈥� concluded Professor David Kinley.

The Commissioner Hayne鈥檚 final report will be delivered on 1 February 2019.