The Commonwealth Bank of Australia (CBA) has confirmed it will be the first bank to embed employees from the Australian Securities and Investments Commission (ASIC) inside its staff makeup.
The fallout from the Royal Commission inquiry into widespread financial misconduct continues, with many of the major banks facing criticism for failing to stamp out the poor behavior that enabled bad lending practices across the board.
With so many products mis-sold, ASIC complained that it was not able to keep on top of the issue and lacked power as a regulator to step in at the right time.
As a consequence, it recommended that it should be able to embed some of its regulatory staff within the big banks at boardroom level to help mitigate some of the malpractice that had carried on for several years.
The changes implementing so quickly will be a boost to those who worried that nothing would happen even with all these issues coming to light. However, with the inquiry leaning so strongly on the industry and parliament calling executives in, it was clear that this problem was serious.
The embedding process will begin next week, with the aim to help develop a healthier culture where customers receive higher priority than sales. Some of the targets previously revealed showed that there was an intent to deliver sales even if they knew that a customer was unlikely to pay it back. Such practices are only likely to cause financial black holes in the future. So, hopefully, stopping these programs as soon as possible will help the banks get back on track.
One clear aspect that ASIC is targeting is how quickly that it receives reports of problems. Some issues stayed secret for months and years, rather than days, in the past. With ASIC demanding a ten-day reporting system, it hopes that embedding its staff will give it a chance to evaluate how well this is working.
As for the timeframe, early reports indicate that the embedding will last anywhere from a few weeks to a couple of months at first, as ASIC aims to see the ins and outs of financial practice and tackle anything worrying that arises.
There is not likely to be any long-term introduction of staff. Rather, they will simply receive temporary placements. ASIC staff will go to the four major banks and the wealth management fund AMP.
CBA said that it sees this process as a good thing. It added: “As we previously indicated, we welcome this move by ASIC as a positive and constructive step forward in the regulatory oversight of the banking industry.”
The bank said that it is confident that this embedding of ASIC staff will help them “produce the best outcomes for all of our stakeholders.”
Part of the reason that ASIC staff will not stay long is to avoid a process called regulatory capture, where they are too close to everyday happenings and may see issues that they would want to report. However, this would not paint an accurate picture of how happenings occur when they are not there, and thus would no longer provide a natural insight.