ALIZF Allianz Ag Muenchen Namen (PK)

By Robb M. Stewart and Rob Taylor 

CANBERRA, Australia--Australia plans to hand financial regulators new powers of enforcement following a year-long probe into misconduct in the country's banking industry, which long had a reputation for being among the world's safest for investors.

The Royal Commission, which was set up in 2017 to conduct the probe, said it was asking regulators to look at 24 cases in which financial institutions may have broken laws, and its final report on Monday recommended giving agencies extra powers of enforcement.

During its investigation, the commission heard allegations of inappropriate lending practices and lying to regulators. In one audio recording played as evidence to the commission, a 26-year-old man with Down syndrome was talked into buying insurance over the phone, despite struggling to understand what he was being sold.

The commission's report comes as Australia's economy is showing signs of weakening after 27 years without a recession. National elections are set to be held in coming months and the center-right government's record of economic management will be coming under scrutiny. Australia's banks are big dividend payers and anchor many people's pension savings, so taking a hard line on the sector carries risks for political parties.

Australian Treasurer Josh Frydenberg said the government would accept all of the 76 recommendations made by the commission and federal judges would get new powers to expedite cases of alleged misconduct. Mr. Frydenberg said the government must balance restoring trust in Australia's financial system with maintaining the flow of credit.

Among the growing signs of economic stress in Australia, data on Monday showed building approvals fell sharply for the second month in a row in December, as banks grew leery about lending amid scrutiny of their business practices. House prices in major cities such as Sydney and Melbourne have been falling for more than a year.

The commission was critical of Australian regulators approach to the industry in previous years and recommended establishing a new oversight panel. It also asked regulators to examine evidence that came to light during its probe to determine whether National Australia Bank Ltd., wealth managers Suncorp Group Ltd. and AMP Ltd. and others should face lawsuits.

The referral of German insurance giant Allianz AG to regulators for failing to report misrepresentations on its website within a 10-day window required by the Corporations Act potentially could result in criminal penalties.

NAB and Suncorp said they were reviewing the report to understand its implications fully, while Commonwealth Bank of Australia pledged to work with regulators asked by the commission to examine its conduct, including in its superannuations business. AMP and Allianz didn't immediately respond to a request for comment.

"Saying sorry and promising not to do it again has not prevented recurrence," Kenneth Hayne, who led the judicial probe, said in the report. "The financial services industry is too important to the economy of the nation to allow what has happened in the past to continue or to happen again."

Karen Den Toll, a regulatory analyst at Deloitte, said the market had been expecting worse, with short selling in advance of the report. "Everyone is saying that Hayne has been very measured in his approach. I think that's a fair assessment, as he has not gone and shocked everyone with fundamental and unworkable changes."

The probe has already spurred changes in the industry. Last April, the chief executive, chairman and several board members at AMP, Australia's largest wealth management company, resigned after the company acknowledged it had misled regulators and been slow to compensate customers for fees charged for financial advice it didn't deliver. More recently, several senior figures at wealth manager IOOF Holdings Ltd. took leave pending a case brought by the prudential regulator alleging breaches of trustee obligations.

The Australian Securities and Investments Commission has estimated the cost for compensation from the big banks and other institutions could top 1 billion Australian dollars (US$725 million).

The Australian Banking Association, the trade group representing the industry, said the banks accepted they were fully responsible for failings highlighted by the commission and were determined to fix problems. "This report contains some very tough medicine for banks," said Anna Bligh, its chief executive.

Write to Robb M. Stewart at robb.stewart@wsj.com and Rob Taylor at rob.taylor@wsj.com

(END) Dow Jones Newswires

February 04, 2019 04:59 ET (09:59 GMT)

Allianz Ag Muenchen Namen (PK) (USOTC:ALIZF)
Historical Stock Chart
From Jun 2024 to Jul 2024

Allianz Ag Muenchen Namen (PK) (USOTC:ALIZF)
Historical Stock Chart
From Jul 2023 to Jul 2024