Australian banks have agreed to implement comprehensive new measures to protect consumer interests, increase transparency and accountability and build trust and confidence in banks.
“Customers expect banks to make sure they have the right culture, the right practices and the right behaviours in place. Banks will immediately establish an independent review of product sales commissions and product based payments, with a view to removing or changing them where they could result in poor customer outcomes.”
Münchenberg stated that banks will improve protections for whistleblowers who speak out against poor conduct and will also make it easier for customers to do business when things go wrong.
The plan, parts of which are subject to regulatory approval or legislative reform, will be overseen by an independent expert. Essentially banks are committing to:
- Review product sales commissions: Independent review of commissions and product based payments with a view to removing and/or changing them where they could lead to poor customer outcomes; banks intend to strengthen the alignment of remuneration and incentives and customer outcomes.
- Make it easier for customers when things go wrong: An independent customer advocate to be appointed in each bank with a commitment to work with ASIC to expand current review of customer remediation programs from “personal advice” to include all financial advice and products.
- Support for employees who ‘blow the whistle’ on inappropriate conduct: Standardised protection of whistleblowers across banks, including independent support and protection against financial disadvantage.
- Remove individuals from the industry for poor conduct: Industry register to identify rogue advisers to prevent the recruitment of individuals who have breached the law or codes of conduct.
- Strengthen commitment to customers in the Code of Banking Practice: The review will be undertaken in consultation with consumer organisations and other stakeholders and completed by the end of the year.
- Support ASIC as a strong regulator: Implement a ‘user pays’ industry funding model to enhance the ability for ASIC to investigate matters. The current breach reporting framework will also be enhanced.
Earlier this week, the Australian Securities and Investment Commission (ASIC) welcomed the Government’s announcement of major additional funding for the regulator.
“This will enable further surveillance and enforcement in areas such as financial planning, responsible lending, life insurance, and misconduct and breach reporting. It will also allow us to build our technological capacity to identify and assess risks and misconduct”, said ASIC Chairman Greg Medcraft.
The bar for conduct failures in Australia has got higher. And of course, will not go unnoticed by regulators in other jurisdictions.
See BRG white paper: The Behavioural Regulators Agenda
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