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Insight into the Royal Commission

by Alexandra Cain | 14 Dec 2017

In early December Prime Minister Malcolm Turnbull announced a Royal Commission into the alleged misconduct of Australia’s banks and other financial services entitiesInsight into the Royal Commission - The Standard - FINSIA

Although the Prime Minister acknowledged Australia has, “one of the strongest and most stable banking, superannuation and financial services industries in the world”, he said the Royal Commission will, “further ensure our financial system is working efficiently and effectively.”

The inquiry will consider the conduct of banks, insurers, financial services providers and superannuation funds and the regulators’ ability to address misconduct.

An interim report is due no later than September 2018, with a final report containing the commission’s findings and recommendations expected within a year.

FINSIA CEO Chris Whitehead says the Royal Commission is an opportunity to lay the foundations for greater trust and support from the community and from politicians into the banking sector.

“The commission’s terms centre on conduct and culture within financial services businesses. That's the space in which FINSIA seeks to, and has for 130 years, added value to the industry,” says Whitehead.

“Our aim is to work with industry to raise standards of professionalism by setting industry standards of individual competency and conduct to help restore consumer trust. This is key for delivering better outcomes for customers.”


Whitehead says his hope for the commission is for positive outcomes and an acceptance of the importance of raising standards professionalism in financial services is critical to driving cultural change.

Whitehead expressed a hope that the commission would be forward-looking in its approach. “It's much better to look forward to prevent issues occurring in the future. We want to improve future outcomes, rather than being too focused on the past.”

The inquiry’s terms of reference are broad in scope and he said an initial task for the commission would be quickly settling on the key issues to investigate.

“The Royal Commission will need to focus and prioritise important aspects on which to concentrate.”

Whitehead’s hope is that the commission will ultimately drive more self-regulation of the industry.

“Industry-led standards are a fundamental tenet of our professionalisation strategy. We hope that, through self-regulation, the requirement for legislation would be diminished.”

Nevertheless, he acknowledges a Royal Commission means there's the potential for additional regulation on the banking sector.

Says Whitehead: “It’s hoped any new regulations would balance opportunities to streamline current legislation and regulation with the introduction of any new requirements.”

As to whether the Royal Commission is likely to improve the customer experience, he says, “our fervent hope is that customers will see better outcomes through the Royal Commission, and that a significant reason for that will be greater professionalism within the industry.

“FINSIA’s aim is for greater professionalism to raise standards of conduct and competency, hold people accountable by their peers and employers, to restore pride in people within the industry. This is what will lead to a better customer experience.”

Above all, any Royal Commission should build community trust, acceptance and support for the financial services industry.

“It should address any issues that stand in the way of that now that come down to questions of culture, including remuneration and profit levels. I hope that the outcome will be better understanding, stronger support and a higher level of trust in the industry,” says Whitehead.

“That isn't a matter of changing community expectations. But an element of community education, combined with changes to the industry and heightened self-regulation will improve outcomes across the financial services sector,” he adds.

As Whitehead notes, what’s required is a reflection on culture at the employee level and within management.

“This is about individuals from the CEO down. It’s essential the CEOs of our major institutions properly balance the needs of customers, shareholders, staff and the broader community. It's something we have to do as leaders.

“The industry is facing challenges around competency and conduct and CEOs obviously set an example. They need to set the tone, but the industry needs to ensure that goes right through the organisation and across the industry. Because ultimately, the sector will be judged on the performance and behaviours of its weakest members.”

As a result he says the industry needs to come up with ways to manage and sanction organisations and individuals that don't abide by the expectations that have been set.

Says Whitehead: “There are already many mechanisms at the corporate level to manage conduct and competencies, the ABA Code of Banking Practice is one example and there are other codes of conduct across financial services and sanctions already in place for breaches of these codes of conduct.

“We believe it is important to add similar robustness around the behaviours of individuals, and sanctions on those individuals who don't meet the standards. That should be the eventual outcome of the Royal Commission.”

 

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