Australian bank shares have jumped after the report on finance-sector misconduct recommended dozens of rule changes but spared the “Big Four” lenders any serious threat to their market dominance.
In a report released by the government on Monday, the retired judge who led a public inquiry into financial-sector misconduct last year, referred 24 cases to regulators for possible prosecution.
But the inquiry’s broader list of 76 recommendations on how to end greed and systemic malpractice stopped short of calling for enforced divestments, cuts to executive pay or tighter lending rules, leaving the banks largely unscathed.
“It is possible that the banks may face criminal proceedings but we do not believe that any of the 76 recommendations by themselves will have a material financial impact,” UBS analysts said.
Citi analysts said it was the “best possible set of recommendations given the circumstances that the sector could have reasonably expected”, while Moody’s ratings agency said it was “unlikely to alter the favourable structure of the banking industry”.
Bank shares soared on Tuesday, driving the Australian financials index to its biggest daily rise since March 2009, reports Reuters.
Commonwealth Bank, the country’s largest bank, rose 4.7 per cent while National Australia Bank Ltd gained 3.9 per cent, and Australia and New Zealand Banking Group Ltd as well as Westpac Banking Corp climbed 5.6 per cent and 7.4 per cent, respectively.
Among the financial planners, which would have to disclose the commissions they receive for selling wealth management products under the report’s recommendations, shares of AMP Ltd and rival IOOF Ltd rose about 10.0 per cent and 8.0 per cent, respectively.
Mortgage brokers, however, were hit hard after the inquiry recommended banks should stop paying them trailing commissions - fees lasting the life of a product which were found to incentivise misselling.
Shares of Mortgage Choice Ltd plunged 25.2 per cent and those of Australian Finance Group Ltd slumped 29.1 per cent.
