Heading into 2022, I’m delighted to see FINSIA’s strategy to professionalise banking and financial services increasing traction.
Our long term core mission has been to restore trust and to put a capital P in professionalism by ensuring all bank staff attain agreed levels of competency - and it’s really encouraging our voice is being heard.
FINSIA’s input into the review of the Banking Code of Practice and the recommendations being put forward highlight a growing acceptance of the crucial need to adopt industry wide professional standards and education.
While there are a number of recommendations being considered by the ABA, it is pleasing the review has listened and recognised our specific concerns.
Most importantly, Recommendation 30 emphatically backs FINSIA’s own suggestions, saying:
“It should be made clear that the commitment to have trained and competent staff that understand the Code and how to comply with it, covers staff at all levels, including management.
“The banks should develop industry wide standards for competency and conduct for bank staff. The Code should also state that staff will be supported by appropriate systems and technology to support compliance with the Code.”
It is our belief at FINSIA that these measures would complement principles-based regulation, rather than overly prescriptive regulation which can have negative outcomes for the customer.
In submissions formulated by our Retail and Business Banking Industry Council - including members from all the major banks as well as other ADIs - we argued that the Code is currently driving an over-reliance upon compliance to rigidly prescribed rules and that this is undesirable because it has been shown to diminish self-accountability.
As we know, a prescriptive approach can never anticipate every circumstance. Customer harm and dissatisfaction is often the result of rigid policies, when the application of personal judgement is needed.
We said that better defined levels of required competency and conduct governed by standards should be included in the Code. This would support a more principles-based approach to the drafting, with further detail in Code-related industry guidelines.
FINSIA’s submission also said that the focus should be on identifying measures, so banks view the Code as a mechanism to “do the right thing” for their customers. While understanding the concerns of groups advocating for prescriptive legally enforceable obligations, it is FINSIA’s belief they are likely to be counterproductive. On the other hand clear and robust personal professional conduct and role competency requirements, with external verification by audit, is also likely to reduce the breaches of the code which have occurred due to “human error”.
Ensuring momentum from the Royal Commission in improving awareness and compliance with the Code in driving outcomes for the Customer, FINSIA believes, involves the three elements of Competency, Conduct and Culture.
In addition the Final Report noted:
The importance of maintaining the status of the Code as self-regulation – i.e. a level of service and protection that goes above the law (p7)
That the Code should include a requirement for banks to take all reasonable steps to have in place the appropriate systems, processes and programs to support an integrated approach to compliance: Recommendation 8
That Industry Guidelines should be considered Code related documents and specifically referenced in the Code. If not following industry guidelines, banks would have to demonstrate how they are following comparable processes in meeting their commitments: Recommendation 10
We believe these Recommendation - particularly Regulation 30 - will have broad support from stakeholders.
Now we will continue a process of consultation with the ABA, its members, Government and Regulators to support implementation of the Recommendations including Recommendation 30.
We certainly would like to think the new BCOP would not be approved without adoption of these requirements.