The latest independent governance expert’s report on the Australian banking industry’s package of reforms has confirmed that the industry has begun to implement initiatives to address concerns over misconduct.
According to the seventh report from “independent governance expert” and former auditor-general Ian McPhee AO, the Australian Bankers’ Association’s (ABA) package of six initiatives to “better protect consumer interests, increase transparency and accountability, and build trust and confidence in banks” has now advanced to its implementation stage.
“The ABA has advised that, in the last three months, the industry has further shifted from design and review to implementation of the initiatives, with a view that each initiative either be completed or have established implementation processes in train by April 2018, two years after the initial industry announcement,” Mr McPhee said.
The six initiatives, first outlined in the Banking Reform Program published in April 2016, focus on:
- Strengthening alignment of remuneration and incentives and customer outcomes
- Making it easier for customers when things go wrong
- Reaffirming support for employees who blow the whistle on inappropriate conduct
- Removing individuals from the industry for poor conduct
- Strengthening the commitment to customers in the Code of Banking Practice
- Supporting ASIC as a strong regulator
Mr McPhee believes that the banks have recognised the need to revise their understanding of their role, underpinned by the reform agenda’s push for the industry to re-establish a view of its role as a “service business, not a product business”.
“Positively, the leading banks have recognised this, revising strategies to recognise that they are a service business, not a product business — meaning, their core purpose is to help customers achieve what is important to them,” the expert said.
The former auditor-general also stated that the customer-centric model should be “an enduring goal for each bank and supported by strategies responsive to the times and reinforced by those in key leadership roles on an ongoing basis”.
Mr McPhee added that he expects the banks to implement their individual policies on remuneration detailed under the revised Code of Banking Practice by 2020, pending approval of the code by the Australian Securities and Investments Commission (ASIC).
Several banks have already stated that they will bring in commission changes for brokers this year, but Mr McPhee said that it was “disappointing” that other banks — such as AMP Bank, HSBC and ING — had not yet published their documents on remuneration.
AMP Bank, however, has stated that it is fully supportive of the reform recommendations and shall be issuing particulars once their annual reports are finalised in March.
Mr McPhee also cited data from an Edelman Intelligence report commissioned by the ABA, which surveyed 1,000 Australians in November 2017 and suggested that public perception of the banking industry has improved.
According to the research, 77 per cent of respondents believe their bank is “becoming more customer-focused”, up from 63 per cent when the research was last conducted in June 2017.
Further, 86 per cent of surveyed Australians believe their bank “helps customers navigate choices to make the best decision”.
While still low, high levels of trust in the banking industry also climbed to 32 per cent in November from 31 per cent in June.