APRA chair Wayne Byres says the regulator will "clearly need to reflect" on the way it thinks about risk after Royal Commission revelations, but the financial services industry needs to step up to change its culture.
"I'm not going to give a full response to the Royal Commission here - that will appropriately be done through our submissions and evidence to the Commission itself," Byres said in his speech at the FINSIA Summit in Sydney this morning.
Byres also wondered out aloud about APRA's approach to risk.
"Consistent with prudential supervisors around the world, APRA has traditionally examined cases of poor conduct as an indicator of risk, but not a direct prudential risk in and of itself, unless it was likely to jeopardise the stability of the system or an individual institution," he said. "We will clearly need to reflect on that approach.
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He said regulatory initiatives in the pipeline will drive change. These include accountability statements, remuneration restrictions, strengthened governance requirements, greater attention to organisational culture, and more forceful enforcement - will drive change.
"But to truly generate cultural change within the industry, the task cannot be left to regulators alone," he said.
"As I have said on a number of occasions, regulators can play their part but cannot regulate a good culture into existence."
Byres also said that none of the industries that APRA regulates are a profession, and supported the establishment of professional standards.
"There is no defined body of knowledge or high entry standards for those who perform key roles. Where codes of conduct exist, they are often totally voluntary. And on the evidence before the Royal Commission, the balance between self-interest, company interest and serving the community's interest has not always been appropriately struck," he said.