In a speech at the Financial Services Institute of Australasia (FINSIA) Summit, APRA chairman Wayne Byres acknowledged that regulatory initiatives in the pipeline — accountability statements, remuneration restrictions, strengthened governance requirements, greater attention to organisational culture and more forceful enforcement — will drive change.
However, Mr Byres added that “the task to truly generate cultural change within the banking industry cannot be left to regulators alone”.
“As I have said on a number of occasions, regulators can play their part but cannot regulate a good culture into existence,” Mr Byres said.
“To borrow an apposite quote, ‘Good banking is not produced by good laws, but by good bankers’.”
Mr Byres acknowledged the findings of the Hayne commission interim report that regulators can and should do more to actively enforce standards of behaviour within the financial sector.
He added that APRA has traditionally examined cases of poor conduct as an indicator of risk, but not a direct prudential risk in and of itself, unless it was likely to jeopardise the stability of the system or an individual institution.
“We will clearly need to reflect on that approach,” Mr Byres said.