Conduct starts from the top

...and regulators will take action against banks which don’t walk the talk

Blog Post by Paul Cottee on 22 February 2021 in category Regulations

ASIC has revealed that six of Australia’s largest financial institutions have paid out over AUD 1.24bn (as at 31 Dec 2020) in compensation to over 974,000 customers who were wrongly charged "fees for no services" or given "non-compliant advice". These breaches extend back more than a decade and were highlighted in the Hayne Royal Commission into the financial services industry.

Whilst these numbers reflect compensation for retail customers, the message is clear, and consistent with the message from regulators globally (think FCA and the GBP 38 billion payment-protection insurance scandal): conduct starts from the top, and regulators will take action against banks which don’t walk the talk. Many regulators are imposing personal accountability and liability upon banks’ senior management (in Australia, the Banking Executive Accountability Regime) and most of the institutions involved have lost at least one C-suite or board-level executive as a result.

The fees-for-no-service and non-compliant advice issues are not the only conduct-related matter in Australia: in recent years, the list also includes:

  • Hard-selling insurance and risky financial products to vulnerable persons
  • Large-scale AML breaches on foreign remittances and at-risk accounts
  • Charging bank fees to the accounts of deceased persons
  • Reference interest rate manipulation
  • Cartel / collusion in a share issue (case brought by the competition regulator)

This matters to the wholesale financial markets as it will affect and instruct the way the banks do business across the board, including with professional counterparties and customers. And this is exactly what the regulators want. Just like in the UK, where the retail-aimed Treating Customers Fairly (’TCF’) initiative soon became a mantra across all business lines, so too is ASIC hoping that raised levels of conduct, culture and accountability within financial services businesses will make Australian financial markets more transparent and efficient, and improve public trust in them.

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