With the banks preparing a new code of conduct following calls for better customer protections, the deputy chairman of the Australian Securities and Investments Commission Peter Kell has warned that, without strong enforcement mechanisms, the effort will merely be seen as window dressing by a sceptical public.
A February report by consultant Phil Khoury called for sweeping reforms to the Code of Banking Practice that the banks said they would have in place by the end of the year. Mr Khoury also reviewed the Code Compliance Monitoring Committee, finding its "role, positioning and mandate were widely seen as inadequate". He called for the CCMC to be strengthened to assure the public of the banks' compliance with the code.
At a conference in Sydney organised by the Banking and Finance Oath, Mr Kell said 99 per cent of the public would think the banking industry should not be allowed to self-regulate.
"Part of that broader perspective is there is still a perception that some of these codes are window dressing," he said.
Helen Rowell is deputy chairwoman of APRA. Quentin Jones
'Community has become cynical
"The key thing with industry codes and making other ethical standards meaningful is not so much in the substantive elements in the code … but are there actual consequences when those things are not realised and adhered to?
"That is the sticking point, and that is where the community has become cynical about some of these measures, because they don't see consequences or accountability when the standards, which can be quite good standards, are not met."
After some non-major banks were unhappy with the nature of the lobbying by the Australian Bankers' Association on behalf of the big banks after the budget's bank tax, Mr Kell suggested it was harder for a lobby group to, at the same time, advocate for better industry standards.
The financial services sector had a "proliferation of different bodies and industry associations that at times operate primarily as lobby groups, rather than groups that are raising standards", he said. "So there is a perception issue around that needs, at times, to be addressed."
'Awareness of the issues'
Helen Rowell, deputy chairwoman of the Australian Prudential Regulation Authority, said regulators and codes of conduct were not on their own enough to improve culture and standards.
"While there seems to be an increase in awareness of the issues that organisations need to focus on, and there are some steps being taken to try to understand the nature of organisations' culture … there is still a long way to go in terms of really understanding what it means in terms of outcomes for customers," she said.
The chief executive of BT Financial Group, Brad Cooper, agreed that strong ethical foundations required more than regulation, which created a framework for minimum acceptable standards.
"Within that framework, you need self-regulation, and codes of practice that normalise standards … but above all else you just need good people," he said.
"And you particularly need good people in an industry like this, because there are information and power asymmetries, and you are [sometimes] dealing with people who aren't well informed. So you need people doing the right thing in that framework.
"Part of the importance of the oath is industry participants calling it out when they don't see the right thing being done, and supporting those who do."This article was first published by http://www.afr.comAuthor: James Eyers