Parliament’s economics committee investigates bank culture

Parliament’s economics committee has expressed ongoing concern regarding the cultural issues present in the banking sector, particularly targeting ANZ. In a recent evaluation of the big four banks post the 2017 Hayne Royal Commission, the committee highlighted that significant lessons have not been fully internalized by the nation’s top financial institutions.

Despite nearly $4 billion in reparations paid by the major banks as a result of the Royal Commission, the committee underscored the persistent cultural and governance challenges within these organizations. The increase in variable bonus caps for lenders and the Australian Securities and Investments Commission’s (ASIC) investigation into suspected misconduct by ANZ were cited as recent examples necessitating continued parliamentary scrutiny of bank conduct.

Notably, ANZ faced the most substantial repercussions, with the committee expressing substantial concern over reported incidents within the bank’s markets division. Last year, several concerning issues emerged, such as an apology to the Australian Office of Financial Management for erroneous data submissions and investigations into behavioral problems among traders in the Sydney office of the $87 billion bank. Furthermore, ASIC is currently probing ANZ for potential market manipulation following a $14 billion Treasury bond sale in 2023.

The committee also raised red flags concerning Commonwealth Bank, the largest bank in Australia, for its decision to escalate the cap on banker bonuses from 50% to 80% of base pay. This move was justified by Commonwealth as necessary to remain competitive with non-bank lenders. The decision to increase bonus caps at the expense of addressing underlying cultural issues within the banking sector was called into question by the committee.

It is evident that despite the past scrutiny and financial penalties levied on the big four banks, cultural challenges persist in the banking industry. The need for ongoing oversight and accountability measures to ensure ethical conduct, appropriate governance, and customer-centric practices within financial institutions is paramount. The recent revelations and investigations into ANZ and Commonwealth Bank underscore the significance of continuous monitoring by regulatory bodies and parliamentary committees to safeguard the integrity and trustworthiness of the banking sector.