Australian bank shares surged the most in a decade after a long-awaited 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, 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,” said UBS analysts in a research note.
Citi analysts said it was the “best possible set of recommendations given the circumstances that the sector could have reasonably expected”.
And Moody’s said it was “unlikely to alter the favourable structure of the banking industry”.
Bank shares soared, driving the Australian financials index to its biggest daily rise since March 2009.
Commonwealth Bank, the country’s largest, rose 4.7%.
National Australia Bank gained 3.9%, while Australia and New Zealand Banking Group and Westpac Banking climbed 5.6% and 7.4%.
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 and rival IOOF rose about 10% and 8%.
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 mis-selling.
Shares of Mortgage Choice Ltd plunged 25% and those of Australian Finance Group slumped 29%.
While the inquiry did not name names, its final report said the taking of fees for services not rendered was potentially a criminal breach of financial laws and recommended regulators determine if any charges should be laid.
Based on evidence presented to the inquiry, Commonwealth Bank, National Australia Bank, and AMP are seen as the most exposed to possible criminal prosecution.
All three companies have promised to crack down on such behaviour.