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ASIC reveals 6 key aspects of a ‘good’ financial system

ASIC reveals 6 key aspects of a ‘good’ financial system

The financial services regulator has outlined what it believes are the six “key components of a good financial system”.

Speaking during a regulatory address at a Sydney event last week, the chairman of the Australian Securities and Investments Commission (ASIC) alluded to the ongoing commissions and inquiries into the Australian financial services and banking industry at the moment, stating that it is a “critical time for the banking and wealth industry”.

In a speech titled Rebuilding trust: A conduct regulator’s perspective, ASIC chairman James Shipton outlined what he believes “good looks like” for the finance sector.

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Mr Shipton said: “I want, today, to give you some of ASIC’s views on the behaviours we want to see by identifying some of the characteristics of what constitutes a good financial services industry — that is, one that is efficient, resilient and fair. And, by doing so, we can identify what the ultimate goal is.

“For this purpose, ASIC has identified six key components of a good financial system that are particularly relevant to banking and wealth management.”

He continued: “First, that financial products do what they say they will do. Meaning that the design of products does not take advantage of asymmetric information, consumer biases or lack of knowledge about the product. This also means these providers have sufficient training and experience in relation to the product or service — this goes to their competence.

“Second, that the providers of financial services prioritise the consumer’s interests and put the consumer’s interest before their own. You can start to hear echoes of the professionalism concept I mentioned earlier.

“Third, financial providers look to do the right thing and act with integrity and fairness, not just comply with the law. They take into account community expectations and standards. They try their best to align their interests with the customer and consider the perennial issue of managing — and I mean, really managing — conflicts of interests. Again, the echoes of care, conscientiousness and professionalism are becoming louder.

“Fourth, mistakes and misconduct are quickly identified, reported and rectified. This also relates to the fifth principle — that financial services providers engage openly with regulators, and cooperate with them when problems arise. Firms should be working towards a culture of disclosure and openness — not just about problems to resolve, but also about their business challenges and risks. Ultimately, the goal should be a culture of ‘no surprises’ between firms and regulators.

“Finally, the sixth principle is that financial services entities should also innovate and use technology to improve products and services to deliver better outcomes for consumers — for real people.”

Mr Shipton concluded: “[W]e have been talking about the trust deficit in finance for far too long. It is time to move beyond the rhetoric to real solutions.

“Right now, for a whole range of reasons, we have the attention of the community, our national leaders and the financial industry. There is a window of opportunity, right now, to:

  • take proactive steps to improve professionalism;
  • [for the industry] take a leadership role in this, with a view to working towards the goal of a good financial services industry — one that is efficient, resilient and fair;
  • recognise that we are dealing with other people’s money; and
  • most importantly, make a difference for Australians.

“So, let’s get on with it,” Mr Shipton said.

[Related: String of scandals could ‘tarnish’ new CBA boss]

ASIC reveals 6 key aspects of a ‘good’ financial system
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Annie Kane

Annie Kane is the editor of Mortgage Business.

As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also a regular contributor to the Mortgage Business Uncut podcast.

Before joining Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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