Four years on from an independent review that found the product-focused culture of Australia’s banks needed immediate reform, the report’s author has said improvements made inside the institutions represent “a substantial achievement”.
The final review from former Australian Public Service commissioner Stephen Sedgwick into retail banking product commissions and payments – released on Thursday – notes that banking industry policies have changed in line with Mr Sedgwick’s recommendations in his original 2017 report, and that staff believe their bank has shifted its focus from products to customers.
“Although the scale of change required varied between banks, the industry has accepted and delivered against my 2017 recommendations that mutually reinforcing reforms were generally required to the culture, management and remuneration of retail bank staff,” Mr Sedgwick said.
“Substantial change has been achieved, which needs to be supported as time passes by continued vigilance of bank management, boards and regulators.”
The findings of the final review include a number of changes that have been made to bank policy to reduce the importance of sales in employee rewards and progression, including no direct links between remuneration and sales, “whole of role” performance assessments and a focus on how sales results were achieved to discourage poor behaviour.
The report said no further recommendations were needed to improve retail banking practices, but that “a sustained customer-centric focus will require continued efforts and monitoring by the sector”.
The original review recommended measures including taking the weight of product sales down to a maximum of 33 per cent of balanced scorecard reviews, revising ”customer-focused” policies that included product cross-sales, and abolishing variable remuneration awarded on a sliding scale based on product sales volumes.
The requirement for banks to adopt the findings of the Sedgwick review in full was a recommendation of the Hayne royal commission.
“Several years ago, I said don’t judge banks by their words but by their actions. Today, as seen in this final review, I believe banks are demonstrating they have heard the community and have moved to change the culture of banking,” Australian Banking Association chief executive Anna Bligh said, commenting on the results of the report.
“While there is always work to be done, the banking industry has come a long way since 2017 in earning back the trust and confidence of Australians.”