Bankers need to get on front foot to restore trust

Chris Whitehead

Chris Whitehead

A new set of global standards is the way forward to change banking culture. Chris Whitehead, FINSIA CEO said: “As we wait for the final report of the Royal Commission, I have mixed feelings. We have had 12 months to come together to forge an industry-wide framework to restore trust in banking.

“However, whilst banks have been working through certain issues individually, we have not yet formulated an industry-wide response.

The origins of FINSIA go back to 1886 when, following a similar series of scandals, concerned bankers came together and agreed to share best practice, ensuring good banking conduct across the industry.

“We need to take the same approach again,” he added.

“Rather than get ‘on the front foot’ to drive change to culture industry-wide, we now wait for Commissioner Hayne’s recommendations.

“We have perhaps lost a key opportunity to influence these recommendations.

“However, I am in no doubt that post publication of the final report the government of the day will look for this industry to demonstrate ownership and commitment to reform.

“The results of waiting, runs the risks consumers will conclude the sector is being forced to respond to the issues of serious misconduct which have been highlighted during the inquiry and have been forced to take action.

“Voluntarily putting our house in order as quickly as possible will lead to a better result for customers and bankers.

“Driving consistent professional standards of conduct and competency are proven to be effective in restoring trust in a sector. It also gives individuals a sense of pride, promoting an aspirational attitude – which is a great incentive in itself.”

To this end, FINSIA is a founding member and active contributor to an important recent initiative – the Global Banking Education Standards Board. This brings together more than 25 banking institutes internationally to share high quality education and conduct standards and ongoing training for bankers. Ethical behaviour
is a high priority of this education and training and a standard for this has already been finalised.

There is now a new draft foundation standard for basic knowledge and competencies that should be required of all staff within a bank.

“We are recommending these standards to the industry as a proven contributor to improved trust and professional pride.

“As Australia is lagging behind some jurisdictions in building effective industry standards to stop misconduct and increase competency levels, the Australian sector should look abroad for ideas. We are not unique in facing these challenges.

“Unlike many other countries, Australia and New Zealand there is currently no requirement for bank staff to hold professional banking qualifications. Neither do key staff need to belong to a professional institute with an industry-wide code of conduct for individuals.

“That should not be the case. And that is why FINSIA has been leading the call for the establishment of Australian industry professional standards.

“As well as shared good conduct standards we need consistent competency requirements, including in the recognition and management of ethical issues.

“We need to ensure that bankers are sufficiently and broadly educated to be able to apply sound judgement, not just “tick procedural boxes” or rely on computer algorithms.”

Additionally, the need for staff continuing professional development – which is now mandatory at FINSIA – imposes an ongoing regime that makes sure skills are up to date and staff are regularly reviewing their ethical obligations. Currently banks have their own approaches to these challenges but with no common industry standard by which they can benchmark. There is also no mechanism for an individuals’ records to follow them if they move around the industry. It is another vital part of being a professional that should be introduced to the banking industry.

“Bankers need to emulate the exacting high standards demonstrated by those professionals – lawyers, pilots, and accountants – who have to keep up to date with their skill levels and demonstrate good conduct. That would certainly help eliminate the need for another Royal Commission in the future.

A slew of recent trust surveys indicates similar expectations towards ethical behaviour from customers.

“However, it’s also important to remember that ethical behaviour doesn’t mean meeting every demand customers make. If a banker has worked out they cannot afford the loan they want, the customer needs to be told, disappointing though that decision would be.

“It is also important to ensure customers don’t simply go to another bank or non-bank to circumvent proper and responsible lending. Banks that are strongly regulated through statute and improved self-regulation should not be undermined by a shadowy less aspirational sector.

“Standards that are worth reaching, combined with regulatory support that holds individuals and their employer accountable, will help rebuild the trust that is clearly lacking.

“The minimum we should expect from the sector is to move to world best practice.”

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