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Commission open to find banker training inadequate

by Caroline Falshaw | 28 Mar 2018
The first round of Financial Services Royal Commission hearings wrapped up in Melbourne last week, with recruitment and training policies and processes put in the spotlight.

In her closing address, counsel assisting the commissioner, Rowena Orr SC, stated that it was open to the commissioner to make findings of misconduct in respect of NAB’s Introducer Program. This misconduct included a failure to ensure that representatives were adequately trained to engage in credit activities as required by s 912A(1)(f) of the Corporations Act.

Evidence given to the commission about NAB’s Introducer Program suggested that the “approach to recruitment, training and accreditation of bankers had not been fully effective in ensuring that all bankers understood consumer lending process compliance requirements”.

In proceedings on the CBA case study it was revealed that accredited mortgage brokers were viewed as agents by the bank, with ongoing accreditation resting not on the brokers skill, but on the volume of business they brought in.

Meanwhile, regarding ANZ, Commissioner Hayne has been invited to consider whether the bank breached cl 27 of the ABA Code of Banking Practice, which requires signatory banks to “exercise the care and skill of a diligent and prudent banker” in assessing whether a credit product is suitable for a customer.

Orr’s address put the industry on notice that using benchmarks such as the Household Expenditure Measure (HEM) may not be a substitute for making a detailed assessment of a customer’s living expenses, and may be too conservative given the cases of hardship brought to light by the commission’s inquiries.

At ANZ, automation of processes and reliance on HEM, Orr stated, led to a “culture of being willing to undertake … a customer benefit trade-off in relation to responsible lending obligations”. 

Industry should act now on required changes

The commission’s work continues, but FINSIA CEO Chris Whitehead called on the industry to act now to implement likely recommendations on standards of competence and conduct.

“The industry should not wait for the findings of the Royal Commission. A code of professional conduct will deliver better outcomes to the community, improve the reputation of the industry and restore pride to the majority of employees who want to do the right thing.

“The code of professional conduct should emphasise individual accountability and standards, and provide mechanisms for independent monitoring, review, and discipline where provisions of the code are breached. It has to be supported by professional competency standards.” 

On the professional competency standards front, FINSIA has recently commenced a pilot of the Professional Banking Fundamentals (PBF) program. The first step on the Chartered Banker qualifications pathway, PBF equips students with an understanding of key principles in credit and lending and how to apply these to deliver appropriate outcomes for customers. The PBF also provides training in professional ethics and how to apply ethical standards in practice. 

Royal Commission: what you need to know

  • 16 April: date when the next round of public hearings start
  • Financial planning and wealth management are the focus of the next round
  • 2810 submissions received so far, covering:
    • 70% banking
    • 9% superannuation
    • 5% financial advice, general insurance and intermediaries

Find out how you can make your skills more relevant with FINSIA's internationally recognised Professional Banking Fundamentals qualification - Learn more 

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