In the aftermath of Australia's Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry, banks have implemented significant structural changes. According to research by Macquarie Securities, this has led to a 2.4% average annual increase in operating costs between 2018/19 and 2021/22, while revenue saw a modest 0.5% rise.
The Royal Commission — which was conducted by former Justice of the High Court of Australia Kenneth Hayne — highlighted issues such as sales-driven commission structures, poor risk management, and improper fee practices, indicating a failure to prioritize customer interests. "In addition to higher operating expenses through the P&L, the banks also saw a significant step-up in capex as investment in systems increased," Macquarie said. “We attribute some of this increased system spend to the higher regulatory burden following the royal commission.”
In our 2022 Deeper Dive, "The Costs of Misconduct," we discuss the massive fines and societal impact stemming from misconduct in the financial sector, and whether they can be treated even tacitly as "costs of doing business."
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