Appearing before the House of Representatives Standing Committee on Economics, Westpac CEO Brian Hartzer urged legislators to consider the “second-order effects” of further regulation that may be introduced to reduce misconduct off the back of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“New regulations and tougher sanctions alone are not going to solve the risk of poor conduct,” Mr Hartzer said.
Mr Hartzer expressed support for an observation noted by Commissioner Kenneth Hayne in his interim report, which suggested that simplifying regulation could reduce poor consumer outcomes.
The major bank CEO warned that further regulation could exacerbate the slowdown in credit and housing market conditions and impede economic growth.
“[In] striving to address the issues that have led to misconduct, it’s important that policymakers remain live to the potential second-order effects of new legislation and regulation,” the CEO continued.
“While overall economic growth remains sound, we are seeing increasing uncertainty, especially among the consumer and small business sectors.
“House prices are falling, income growth has been low, and consumer spending is likely to be affected by people’s confidence in the value of their home.
“Therefore, regulatory changes that impact how much individuals can borrow, the cost and availability of credit for business, or the availability and affordability of suitable financial advice, should be considered carefully.”
CBA and Westpac accept RC charges
Also appearing before the parliamentary committee was Commonwealth Bank CEO Matt Comyn, who acknowledged the failings of the banks highlighted by the financial services royal commission.
My Comyn accepted Commissioner Hayne’s charge that the bank was “too slow” to report misconduct and implement internal reform.
“Our customers and the community rightly expect that we always to do the right thing, but we’ve seen far too many instances of unacceptable customer outcomes,” Mr Comyn said.
“As the royal commission has shown, there have unfortunately been failures of judgement, failures of process, failures of leadership, and in some instances, greed.”
Mr Comyn continued: “We’ve been too slow to identify problems, too slow to fix underlying issues, and too slow to put things right for customers.
“We became complacent. Our capability has been inadequate in critical areas, particularly operational risk and compliance.
“We have underinvested in prevention even though we have invested significantly in customer remediation. This is completely unacceptable.”
Westpac CEO Brian Hartzer apologised for the bank’s “confronting” failings.
“The impact of these actions on banks is significant and ongoing. The issues they have raised are confronting, and on behalf of Westpac, I would like to once again apologise unreservedly to any customer we have let down.”
[Related: ‘A day of shame for Australia’s banks’: ABA]
Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.