The theme of ASIC’s annual forum in May this year had a Hollywood ring to it – ‘other people’s money’. The 1991 movie of the same name starring Danny DeVito was about a corporate raider who put profit above all else, as mere humans fell by the wayside. It’s an appropriate theme as the foul stench left by the royal banking commission begins to dissipate. ASIC chair James Shipton set about to “remind the finance industry of its core function – to serve people – and its obligation to act efficiently, honestly and fairly”.
On the last two obligations, the Australian financial services industry – in particular the big banks – are
starting from a low baseline. Shipton issued a “fairness challenge” to the industry and invoked the Hippocratic oath required of medical students – ‘first, do no harm’. With each profit-minded initiative, the industry must ask itself: ‘Is this practice or product going to cause harm, be detrimental or have a negative consequence?’
The answer would be a resounding yes in many of the instances that came to light at the royal commission, including charging fees to people who were no longer alive and deliberately pushing people deeper into debt. If these sorry tales are anything to go by, the commissions and bonuses that drives the banking world are inherently antithetical to the ‘do no harm’ philosophy.
In what could be construed as a colossal understatement, Shipton cast doubt on the industry’s
performance on the fairness front in recent years. “I am not convinced this level of questioning and procedural discipline has been applied by the financial industry when developing, and reviewing, business practices and financial products,” he says.
The banking industry’s commitment to ethical behaviour remains a work in progress, but perhaps
the findings of the banking royal commission will be a genuine game changer instead of the catalyst of another long report that, damning as it is, doesn’t change much.