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Category: Banking / Consumer Protection / Consumer Finance

Banks' plan to tidy up their act already slipping behind schedule

Friday, 21 Oct 2016 13:42:01 | Stephen Letts

Steven Munchenberg is standing down as the ABA's CEO after more than six years. (News Online Brisbane)

The Australian banks' plan to restore public trust and improve customer outcomes has already slipped behind schedule after just six months of operation.

The initiative from the Australian Bankers' Association to combat mounting community anger about commission-driven sales scandals has become bogged down over how to fund supervision of the reform package as well as dealing with reporting breaches.

The quarterly review conducted by former Commonwealth auditor-general Ian McPhee said the ABA had foreshadowed the completion of measures relating to the industry funding model and breach reporting guidance were not likely until the end of next year, six months behind schedule.

The report is the second instalment from Mr McPhee since he was appointed by the ABA in May as the independent reviewer of the banking industry's progress in instituting a package of initiatives to improve an image tarnished by scandals relating to poor financial advice, deceptive conduct and overcharging fees.

The ABA package was based on six primary initiatives:

  • Reviewing product sales commissions
  • Making it easier for customers when thing go wrong
  • Reaffirming support for employees who "blow the whistle" on in inappropriate conduct
  • Removing individuals from the industry for poor conduct
  • Strengthening the commitment to customers in the Code of Banking Practice
  • Supporting ASIC as a strong regulator

Of the 12 key planning milestones, a third are either likely to fall behind schedule or are already confirmed to miss their targets.

The report found that the key review of product sales commission, which goes to the heart of many of the scandals, is being closely monitored to keep it on track.

"As expected, there has been some adjustment to milestones relative to the provisional implementation plan published in my first report," Mr McPhee said.

"Some milestones have been completed ahead of schedule and there has been slippage on some others."

Mr McPhee noted the greatest progress had been made in addressing consumer concerns and protecting whistleblowers.

Already there has been a fair bit of rewriting of the original objectives by the ABA.

The "independent customer advocate" has become a "dedicated customer advocate", while the phrase "bad apples" has been excised from the initiative dealing with removing individuals from the industry for poor conduct.

The reform process has the support of 20 of the ABA's 25 members.

Those abstaining - Bank of America Merrill Lynch, Bank of China, Bank of Sydney, BNP Paribas and United Overseas Bank - are wholesale and specialist banks which provide products mostly to institutional investors, which the ABA deemed to be outside the consumer-focussed reforms.

"It nonetheless could be expected that some of the customers of those banks not participating could benefit from the banks adopting, or adapting, the industry initiatives," Mr McPhee pointed out.

In a statement, the Commonwealth Bank said Mr McPhee's report demonstrated that a significant amount of work had already been undertaken by the industry to build trust and confidence in banks.

CBA's head of retail banking Matt Comyn said in a statement that the reforms are substantial and complex.

"It's pleasing to see real progress being made and we will keep working to ensure we raise standards to better meet community expectations," he noted.

In the meantime, one of the key architects of the reform process, Steven Munchenberg, has announced he will be stepping down as the ABA's chief executive after more than six years leading the bank lobby group.

Mr Munchenberg is planning a career change and will stay on until a replacement is found.

The next report from Mr McPhee on the reforms' progress is due by late January, 2017.

AustraliaPlus


 

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