How Has The Banking Commission Report Affected Market Shares?
2019 has already been a big year for financial reports: the Productivity Commission’s report on Superannuation was released on 10 January, and on 1 February, the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was delivered.
The Commission report had plenty to say about banking executives and individual misconduct and greed fuelling the problems caused in the banking industry – including allegations of unethical and criminal behaviour. Several of the 76 key recommendations revolved around regulatory bodies, with demands for more stringent enforcement of existing laws and calls to address conflicts of interest which can occur when financial advisors are paid commissions for the products they recommend to clients.
The report notes that ‘culture, governance and remuneration are closely connected’ which means regulators have to step up in their supervisory roles. “Supervision must extend beyond financial risk to non-financial risk and that requires attention to culture, governance and remuneration.”
What Does That All Mean For Investors?
But what does that all mean for investors?
Better news than you’d at first think. In the wake of the report, banking stocks rose.
Mark Humphery-Jenner at SmartCompany suggests a few reasons why banks are surging rather than falling despite the reports’ criticisms: that the recommendations weren’t as strong as many feared they would be; that the government responded calmly; and that the report’s recommendations are going to be good for the industry.
In fact, the banks had already begun reforms ahead of the final report, which means that there was less shock when it was delivered. Current reforms to advisor fees and the prospect of improved governance are all good for the long term future of the sector, and should be a boost for shareholders.
Impact on Lending And Property Market
As for the impact on lending, the Urban Developer reported on 4 February that the report was unlikely to have an impact on the property market, as there were no recommendations to tighten lending practices. Along with things like advisor fees, banks have been addressing their lending practices since 2018. Lucia Stein of the ABC noted that it won’t really be harder to get a loan, but nor will it be cheaper.
If you would like to speak with a professional investment adviser about how the report might impact your investments or see how your portfolio is positioned for the year ahead, contact United Global Capital today on 03 8657 7640 or email info@ugc.net.au for a no cost, no obligation consultation.
Photo Credit: The Courier Mail