Australian banks unveil reforms in wake of series of scandals

SYDNEY/ Reuters

Australian banks on Thursday promised unprecedented reforms to protect consumers and boost transparency following revelations of misconduct and ahead of a federal election set to be fought partly over calls for tougher sector oversight.
The package includes reviewing sales commissions, supporting whistle-blower employees and black-listing individuals for poor conduct, the Australian Bankers Association (ABA) said.
The politically charged announcement is the first co-ordinated industry-wide step by Australia’s biggest banks to clean up their act in the wake of reputationally damaging probes into wealth mismanagement, insurance scams and benchmark interest rate rigging.
“We are very conscious that there are issues out there that people are concerned about,” ABA Chief Executive Steven Munchenberg told
reporters on Thursday.
“We are now responding to some of the current concerns.”
Major lenders National Australia Bank, Commonwealth Bank, Westpac and ANZ Banking Group have suc
cessfully pulled through the 2008 financial crisis but are now facing the problem of mounting criticism over misconduct even as they continue to deliver record profits over various months.
The plan announced on Thursday, parts of which are subject to regulatory approval or legislative reform, would be overseen by an independent expert, the ABA said, although it gave no details about specific measures that would be taken.
The review would also look at the sensitive issue of remuneration, sales targets and incentives that have encouraged misselling of financial products, Munchenberg said.
It comes as political pressure is piling on Prime Minister Malcolm Turnbull to order a high-powered judicial inquiry into financial industry misconduct as he campaigns for a federal election in July.
Turnbull and the ABA have rejected calls from the opposition Labor Party for a Royal Commission into the industry, saying the existing watchdog and self-regulation are enough.
Banking analysts say a Royal Commission could open a can of worms and expose top executives, who have so far avoided direct responsibility, to intense scrutiny about what they knew about malpractices in their firms. Turnbull and Treasurer Scott Morrison met with bank bosses earlier Thursday to discuss the reforms.
“There have been some failures and we are very concerned about the grief and loss that individuals have suffered,” Turnbull told reporters.
He said he told executives there had to be a “demonstrated change in the culture of banks” to rebuild community trust.
The banks’ announcement came a day after Turnbull’s conservative government announced reforms to beef up the powers of the markets watchdog, with the industry itself asked to foot the bill of A$127 million ($99 million).
Asked on Melbourne radio whether he believed the banks’ assurances that those costs would not be passed on to customers, Labor leader Bill Shorten said: “Even a crocodile wouldn’t swallow that.”
The political debate is a new headache for Australia’s banking chiefs who are already being forced to respond to investor concerns about rising bad debts and slowing profit as the commodities super cycle plumbs new lows.