Bank culture has been identified by the Reserve Bank as a risk to financial stability in its six-monthly review of the financial system.
The Reserve Bank said that “In the current environment where investors still expect high rates of return, despite regulatory and other changes that have reduced bank ROE, banks need to be careful of taking on more risk to boost returns. A central element to address this issue is to ensure that banks build strong risk cultures and governance frameworks.”
The review cites examples where the absence of strong positive culture has given rise to a deterioration in asset performance, misconduct and loss of public trust and the AUSTRAC civil proceedings against the Commonwealth Bank of Australia for breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act.
The Reserve Bank endorsed the strengthening of APRA’s powers and the banking industry’s own initiatives to improve culture including background checks aimed at preventing individuals with a history of misconduct moving within the industry, and rewriting the Code of Banking Practice to strengthen its commitment to customers.
