- Corporate regulator ASIC says its staff embedded in banks will have the task of modifying behaviour to ensure consumers are put first.
- ASIC believes the initiative will change the mindset in the thinking of decision-makers in the big four banks and AMP.
- The new program is being called “close and continuous monitoring”.
Regulator ASIC has already started to embed staff to “continuously monitor” the actions of the banks and to improve corporate behaviour.
The initial focus will be on breach reporting and the potential for consumer harm.
The financial services royal commission has heard that it takes too long for the regulator to be informed when breaches of banking licences are uncovered.
It took four years on average for financial institutions to discover the misconduct and then 123 days on average for that to be reported to ASIC.
Too often, the royal commission said in its interim report, short term profit is pursued at the expense of basic standards of honesty.
The scheme to have dedicated staff within the big four banks and AMP to monitor governance and compliance was announced in August along with special funding from the federal government.
The money was part of $70.1 million for ASIC to ensure the corporate regulator has the resources and powers it needs to combat misconduct in the financial services industry.
We know ASIC was building a team of up to 20 people to work inside the banks and that a “significant” amount of time would be spent within the institutions.
But the scheme has been light on detail, until now.
“We believe this initiative will change the mindset in the thinking of decision-makers inside financial institutions,” says John Price, a commissioner at ASIC, writing in Company Director, the journal of the Australian Institute of Company Directors (AICD).
“Any decision-maker insider a financial institution who interacts more regularly with a senior ASIC officer, will have regulatory issues — the physicality of the regulator, almost — firmly in front of mind.”
He says the scheme won’t be the same as ASIC staff secondments to banks.
“These teams will not be on secondment,” he writes.
“ASIC has and will continue to use secondments as a valuable way of upskilling our staff and broadening their knowledge of industry practices.”
He says the new program is being called “close and continuous monitoring” (CCM).
The goal is to modify the behaviour of the banks to ensure they put consumers first in their decision-making and to respond to unfair conduct.
“Although new to Australia, these approaches have been undertaken to good effect in other jurisdictions,” Price says.
“The initial focus of these supervisory teams will be to drive significant improvements to financial services breach reporting which is, in many ways, the key to improving corporate behaviour overall.
“The record shows that it takes far too long for a breach to be detected, acknowledged internally at a sufficiently high level, let along reported to ASIC within the required time frame.
“This must change. Our system follows the gatekeeper model. At its heart is the obligation for those at the coalface of our financial services industries to maintain a rigorous oversight of their systems and people, and to quickly report and correct occasions where standards slip.”
Price, in a speech last night in Melbourne, touched on the program, saying the new CCM team started its first onsite visit in last month.
The next and final round of banking royal commission hearings will see bank chairs and CEOs being grilled.
Starting next week, NAB Chair Ken Henry and Commonwealth Chair Catherine Livingstone are confirmed as witnesses.