Banking Royal Commission concludes with a focus on regulators and culture, rather than additional regulation

The royal commission into Misconduct in the Banking, Superannuation and Financial Services Industry has made a number of recommendations consistent with the Governance Institute’s own conclusions on good governance.

Commissioner Hayne highlighted the important role of leadership embedding an ethical culture from the top down. He listed examples of poor leadership, poor decision making and poor behaviour, which showed endemic problems with corporate culture and the failure of governance across the industry.

Developing the right tools, training and recruitment programmes to encourage better conduct is now a priority for all organisations. Once these programmes have been instituted, they need to be constantly reviewed to ensure they remain fit for purpose, and that the changes have been effective. Hayne raised several issues around non-financial metrics and performance goals reporting, highlighting a culture of organisations treating it as little more than a ‘box-ticking’ compliance exercise.

The Governance Institute has long advocated for strengthened regulators, rather than additional regulation. We welcome the proposed new oversight body, which will ensure ASIC and APRA work better individually, collaborate more effectively and enforce more stringently. If trust is to be restored in the sector, then those guilty of wrongdoing must be brought to account.

Finally, clarity around board and management accountability, and the responsibilities of each is an essential component of good governance. Boards need to be able to hold management to account, making decisions based on accurate data.

How the sector responds to Hayne’s Report will be vital, because building long term stability, and ensuring the continued high performance of the sector, will determine the health of the Australian economy as a whole.

A Governance Institute of Australia guide into the Royal Commission’s recommendations will be available shortly.

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