The conduct and culture within Australia's big banks is a major problem and the Government's proposed executive accountability regime is a step in the right direction - though it may not go far enough, ASIC chairman Greg Medcraft said.
Speaking at a Thomson Reuters Newsmaker event in Sydney yesterday, Medcraft said holding individuals within major organisations to account for their actions and those of their staff is a good first step toward changing the conduct and culture of said organisations - but it should encompass more segments of the financial services industry.
"Making sure that you're anticipating problems that might occur, as opposed to going after them when they do occur, is a good step in the right direction. It should probably be extended beyond the scope of APRA in the future though, into the areas that ASIC operates in because that's where investors, shareholders and consumers can really get hurt," Medcraft said.
He cited culture as the biggest driver of conduct and, while ASIC isn't interested in micro-managing what people do, ensuring that consumers and investors have trust and confidence is its priority.
"That's why we encourage firms to take hold of their own future. We always say to people that we can do it the easy way or the hard way - we're happy to do both," Medcraft said.
Despite the various, ongoing investigations within Australia's banks - most notably ASIC and AUSTRAC's current inquiries into the Commonwealth Bank - Medcraft acknowledged that culture and conduct, along with accountability, in the sector remains a significant issue for the corporate regulator.
This is largely due to the fact that Australia's big banks are extremely powerful and not used to being challenged, Medcraft believes.
"I think we've surprised the banks by taking them on... I think that's probably shocked them a little bit. I think they're probably not used to having that happen, but when I came in as chairman the first thing I decided was that we had to build a war chest to take on big cases so we accumulated about $80 million. You don't go into a fight unless you're willing to see it through to the end, and we are," he said.
"Often when there are problems people will say 'Oh it's just a few bad apples' but at some point you have to wonder how many bad apples you can have and is it actually a problem with the tree."
Medcraft conceded that the issue will stand as his biggest piece of unfinished business when he departs the watchdog in November.