In his third report into the Australian banking industry’s reform implementation, independent reviewer Ian McPhee has found initiatives led by the Australian Banker’s Association (ABA) have made the most improvement.
Mr McPhee said there had been an “increase in the number of both planning and agreement-of-principles milestones completed” since the release of the second report, however several initiatives were falling behind schedule and the timing for their milestones will need to be adjusted.
“Those measures for which the ABA has primary responsibility are progressing best, while other initiatives are proving more challenging due to particular complexities or the reliance on other parties to carry primary responsibility,” he added.
The review into product sales commissions is at risk of falling behind schedule, and the Code of Banking Practice review will not meet its planned implementation deadline as a result of a delay in the reviewer’s schedule, Mr McPhee said.
Additionally, initiatives relating to the introduction of a customer advocate were one of the areas posing difficulties, Mr McPhee said, as smaller banks with fewer complaints or which were owned by larger banks require extra consideration to ensure the role fits the business model and caters to client needs.
Despite this, the ABA has said it will work with banks with a mind to complete the implementation of the customer advocate role with remaining banks by the end of March, ahead of its June deadline.
“The ABA has also recognised that it is possible that the Guiding Principles may need to be amended to provide additional guidance to the participating banks on particular aspects, such as separation from the business,” Mr McPhee said.
“If this turns out to be required, the ABA has undertaken to involve key stakeholders and to consult with me prior to finalisation of any revisions.”
Furthermore, the ABA worked with ASIC and successfully completed its expansion of customer remediation programs with the introduction of Regulatory Guide 256: Client review and remediation programs conducted by advice licensees (RG 256), Mr McPhee said.
“It is noteworthy that ASIC is encouraging a broad application of RG 256,” he added.
“While RG 256 focuses on the provision of personal advice by AFS licensees (including banks and their subsidiary entities), it also encourages other financial entities (such as superannuation trustees, credit providers or financial product providers) to use these principles when undertaking review and remediation activities.”
ABA executive director of retail policy Diane Tate said the industry was "working hard" to implement the reforms, and described Mr McPhee's comments as encouraging.
“The findings of these reviews will be an important impetus for change, but we are not sitting on our hands. Banks are working on how they can improve their commitments to customers, including small businesses, and promote ethical behaviour of staff,” she said.
“We are also continuing to work on the best way to measure the success of our reforms.”
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