Banking News

Improvement of bank culture and conduct must not become ‘white noise’: ASIC

(21 July 2016 – Australia) Australian Securities & Investments Commission (ASIC) chairman Greg Medcraft, has told senior bank executives that they must ensure efforts to improve culture and conduct do not become “white noise” to the rest of the organisation.

At the release of a study revealing the country’s negativity towards banks’ ethics, Medcraft said recent scandals had clearly combined to “fundamentally undermine investor trust and confidence” in the financial institutions.

He described the banks’ alleged rigging of the bank bill swap rate, as “like polluting the water system”, which was why ASIC would take the case to court if ANZ, Westpac and National Australia Bank did not settle on the regulator’s terms.

“What we want is a credible enforcement outcome that is commensurate with the behaviour we are trying to deal with and that sends a very strong message that this is not acceptable,” Medcraft told the Sydney Morning Herald, however, he did not comment the regulators investigation into Commonwealth Bank, it said.

“No one is beyond the law and that’s why we took this case on, because if we want Australians and we want the rest of the world to have trust and confidence in our financial system, what is important is that nobody is beyond the law.

“We do need a banking industry we can trust because, frankly, capital markets have a role to play, but banking is still a really important way of actually channelling savings and funding the economy.”

Mr Medcraft said the banks’ wrongdoing in past years could not be brushed off as “legacy” problems, revealing that ASIC was finding issues that suggested management and boards’ views on culture may be too rosy.

With Australian Prudential Regulation Authority chairman Wayne Byres in the audience, Mr Medcraft added that he had “constantly been disappointed” at the “gap in culture or ethics in the banks in the last few years”.

“What troubles me even now, with some of the things we’re investigating, is we often see issues where the customers have had to go to complaint mechanisms to deal with the way they’ve been treated,” Medcraft told reporters.

“They’ve actually had to be elevated to actually get some action, which means the top thinks it’s fine, but there’s still a problem.

“And that’s always the issue with culture — it starts at the top, but you’ve got to make sure by the middle (management) it doesn’t become white noise.”

In research conducted by East & Partners earlier this year, CFOs, treasurers and business owners said that a bank’s code of conduct, on average was not “closely linked” to their willingness to retain that bank’s services from a business banking perspective. That relationship decreased further in a retail banking environment.