The banking royal commission's final report, and the Government's support for all 76 recommendations, leaves some parts of the financial sector at risk of being effectively legislated out of existence.

Key recommendations: Commissions should be largely eliminated from the financial sector, including mortgage broking, financial planning and insurance sales

Commissions should be largely eliminated from the financial sector, including mortgage broking, financial planning and insurance sales Mortgage brokers should meet similar requirements to financial planners to put their clients' best interests first

Mortgage brokers should meet similar requirements to financial planners to put their clients' best interests first Car dealers and others selling financial products at the point of sale of goods should be subject to responsible lending obligations

Car dealers and others selling financial products at the point of sale of goods should be subject to responsible lending obligations Financial planners should seek their clients' agreement every year if they are charging ongoing fees for advice

Financial planners should seek their clients' agreement every year if they are charging ongoing fees for advice Farmers should have access to a national farm-debt-mediation scheme and the appointment of receivers should be a last resort

Farmers should have access to a national farm-debt-mediation scheme and the appointment of receivers should be a last resort A last-resort compensation scheme, funded by industry, will ensure consumers who suffer bank wrongdoing receive compensation

A last-resort compensation scheme, funded by industry, will ensure consumers who suffer bank wrongdoing receive compensation Several institutions may face criminal charges, while many others have been referred to ASIC for further investigation

Commissioner Kenneth Hayne's report was scathing of a sales culture that resulted in poor customer outcomes, and recommended dramatic changes to the payment of mortgage brokers and financial planners that would see many leave the industry, as well as a major overhaul of insurance sales practices, especially for funeral cover.

The commissioner also referred several institutions to the corporate regulator for possible criminal charges around the "fees for no service" scandal, but declined to name names of individuals or companies that might face prosecution.

"Providing a service to customers was relegated to second place. Sales became all important," the commissioner lamented.

"Rewarding misconduct is wrong. Yet incentive, bonus and commission schemes throughout the financial services industry have measured sales and profit, but not compliance with the law and proper standards."

In the Government's initial response to the commission's final report, Treasurer Josh Frydenberg said it was taking action on all 76 recommendations, "and in a number of important areas is going further".

"My message to the financial sector is that misconduct must end and the interests of consumers must now come first," he said.

"From today, the sector must change, and change forever."

Mortgage brokers face business-threatening commission overhaul

A key area for change is conflicted remuneration — that is where financial professionals are paid commissions for selling clients products, even though they may not be in the clients' best interests.

To that end, Mr Hayne recommended first a ban on trailing commissions to mortgage brokers. Trailing commissions are fees paid to someone selling a financial product, usually for as long as the customer has the product, so if you have a 25-year loan the broker might be getting commissions for the next quarter of a century.

Next, he wants a ban on banks paying any commissions to brokers, as well as an obligation for brokers to act in their clients' best interests, to be rolled out within two to three years.

But with more than half of all home loans now written through brokers and many smaller financial institutions relying on them for almost all their loan origination, the Government has adopted a watered-down version of this recommendation.

While it proposed brokers be subject to a best-interests duty and for trailing commissions and "other inappropriate forms of lender paid commissions" to be banned from July 1, 2020, it is planning for a review in 2023 about whether upfront commissions should be removed and brokers moved to a "borrower pays" system.

Financial planners in Hayne's firing line

In financial planning, Mr Hayne recommended planners must seek an annual renewal of all ongoing fee arrangements, where clients are sent a list of the services they should be provided and must agree in writing to pay the fee.

This is a key recommendation to avoid a repeat of the fee-for-no-service scandal, where clients, including some who were dead, were charged fees for financial advice that was never provided.

Mr Hayne also targeted the remaining commissions received by financial planners that were not already outlawed by the Future of Financial Advice (FOFA) laws in 2013.

The commissioner concluded that grandfathered commissions allowed by FOFA should be repealed "as soon as is reasonably practicable".

The Government said it would end grandfathered commissions, effective from January 1, 2021.

Additionally, Mr Hayne recommended life insurance commissions should be reduced to zero, unless ASIC identifies a good reason for retaining them.

ASIC should also consider whether commissions are justifiable for the sale of general and credit-protection insurance.

However, while the Government supports ASIC's review into insurance commissions, it has not expressed a view that these commissions should be removed.

The insurance sector is facing the prospect of further restrictions to its sales practices, with Mr Hayne proposing anti-hawking laws be extended to the sector.

Under particular threat are funeral insurers, with the commissioner recommending they be regulated as a financial product.

That would undermine many of the business models in the sector, particularly those that target vulnerable groups such as regional and remote Aboriginal and Torres Strait Islander communities.

New compensation and dispute schemes

Implementing a recommendation of the commission report, the Government has announced the establishment of a new industry-funded compensation scheme of last resort to be administered by the Australian Financial Complaints Authority (AFCA), itself established by the current Coalition Government.

In addition, the Government said it would pay about $30 million in compensation owed to almost 300 consumers and small businesses for unpaid determinations by the Financial Ombudsman Service (replaced by AFCA) and the Credit and Investments Ombudsman.

Farmers will also get fresh assistance in resolving disputes with their bankers, with a new national scheme for farm-debt mediation, the Government's support for eliminating default interest on loans in areas impacted by natural disasters and supporting the appointment of receivers or administrators only as a last resort when borrowers fall behind on repayments.

Both farmers and small business operators raised concerns at the royal commission that banks were very quick to call in administrators and that their assets were often sold off at fire-sale prices to recover bank debts, leaving the borrower with nothing.

The Government is also supporting My Hayne's recommendation that the definition of a small business be increased to include those with fewer than 100 staff where the loan is less than $5 million, so more firms have access to the protections of the banking code of practice.

Criminal charges possible but not detailed in report

The commissioner has referred 19 potential breaches of the law to ASIC for further investigation, however the report is short on specifics.

Mr Hayne also noted he had referred a pair of institutions to the corporate regulator for possible criminal charges around the "fees for no service" scandal, but declined to name individuals or companies that might face prosecution, because ASIC was still investigating.

Mr Hayne observed that the regulator appeared not to have considered criminal action until the topic was raised by him during the questioning of Nicole Smith from National Australia Bank's super trustee, NULIS.

"I invited ASIC to consider whether criminal or other legal proceedings should be instituted in respect of that conduct," Mr Hayne wrote in the final report.

"Examination of these issues by ASIC is still continuing, and it would not be right for me to anticipate the outcome of those deliberations."

While maintaining the twin peaks model of financial regulation, Mr Hayne has urged a clearer division between APRA as the regulator responsible for ensuring financial stability and ASIC as the regulator primarily tasked with taking enforcement action when financial institutions breach laws.

Both regulators would also be subject to oversight from a new body that would report at least twice a year to the minister on the performances of APRA and ASIC.

Mr Hayne had a dig at ASIC and urged the regulator to seriously consider court action, leaving infringement notices for administrative breaches, particularly when dealing with large corporations.

"Misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished," he concluded.

"Misconduct, especially misconduct that yields profit, is not deterred by requiring those who are found to have done wrong to do no more than pay compensation.

"And wrongdoing is not denounced by issuing a media release."

Mr Hayne also called for industry codes of conduct to be made mandatory in many instances and for key provisions to become legally enforceable.

The report additionally recommended superannuation and insurance be subject to the Banking Executive Accountability Regime (BEAR) which, as its name suggests, places extra obligations on bank bosses and larger penalties, including clawback of bonuses and pay, for those who fail to meet their requirements.

The financial sector has so far cautiously welcomed the findings, with the Australian Banking Association's chief executive, Anna Bligh, noting there are some "very radical suggestions" that need "careful thinking".

"It will make changes to what financial services and products can be offered, how staff are paid, what sort of penalties there'll be for wrongdoing," she told reporters.

"There'll be new offences for a range of activities and, importantly, new rights for customers."

Reasons for not extending the commission

Mr Hayne had come under intense pressure on many occasions to ask the Government for an extension of the one-year time frame granted for the investigation.

The Government said such an extension would be given if it was requested, but the commissioner had declined the invitations.

Mr Hayne said the commission had heard enough evidence from the 27 financial-sector victims that were representative of the broader problems in the industry.

"The decision not to seek extension was also taken recognising the central importance that the health of the financial system has for the nation's economy and thus for every member of this society," Mr Hayne said.

"For me, these wider considerations were determinative. It is time to grapple with the key questions identified."

However, that time will probably not be until after the federal election, which is expected to be held in May, with only a handful of sitting days for Parliament left before the poll.