Australia’s banks need more than pledges from CEOs to improve their culture, a leading finance expert has warned, following a series of scandals which hit their financial planning and insurance arms.
Professor Paul Kofman, dean of business and economics at the University of Melbourne, welcomed promises by CEOs to improve bank culture, but said it was not enough to fix the erosion of trust that had opened up between the public and the industry.
Speaking ahead of a conference on banking and culture in Melbourne on Tuesday, he said culture needed to be improved throughout organisations, not just top-down.
Mr. Kofman said, “The public image of banks and financial institutions leaves much to be desired and is hardly a glowing endorsement for the profession”.
“Without a complete overhaul of recruitment, internal governance, and performance development, it seems unrealistic to expect senior management to change culture simply leading by example.”
The big four banks have undergone severe political scrutiny as series of scandals involving the mistreatment of customers rocked the industry, prompting CEOs to apologise for what they say is a “trust gap” between them and the community.
“If a change is to occur, it will require more than a media appearance by the CEO.”
Reserve Bank governor Philip Lowe has called on the banks to address their incentives-based culture, saying the industry needs to return to being a strong service profession rather than a “marketing or product distribution” business.
The Australian Bankers’ Association executive director of retail policy Diane Tate said the industry was addressing culture through its six-point plan announced in April. “Banks accept that they haven’t always lived up to the standards set for them,” she said.
“You can’t regulate culture but you can promote ethical behaviour, and that can be instilled by values of organisational leadership and performance management.”
Mr Kofman said contributing to the problem of trust was the fact that areas of the banking industry remained unregulated. He will address the industry alongside corporate watchdog head Greg Medcraft.
“Technologically disruptive providers like Fintech, P2P, crowd-funding and various offshore markets remain largely out of scope for our guardians,” he said.
Suncorp director Sally Herman said company boards also played a role in ensuring a positive culture was being upheld at the banks.
She said, “From a board perspective, it’s about making sure there is that alignment between policies and behaviours”.