Via The Australian:
Treasury told the royal commission into financial services that the second round of hearings had made it “clear” that poor culture and misaligned incentives were the “key cause” of misconduct, and said there were many benefits that could come from the major banks splitting up their financial advice and wealth management arms.
In a cache of submissions to commissioner Kenneth Hayne, and released last night, banks and regulators had been asked to justify the entangled cross-ownership of businesses and address issues such as conflicted remuneration for financial advisers, the shunting of customers into in-house products and the breakdown in compliance between parent companies and rogue financial subsidiaries.
“There should be no trade-off between long-term profitability and having a good culture and providing services of value to customers, where there is effective competition,” Treasury said.
It said the commission should investigate what the benefits were from breaking up the banks measured against a “status quo” model where the banks get to keep their wealth management arms with tougher rules to mitigate conflicts of interests.
Too right. But we need more. Either we remove the public wholesale debt guarantee forever or apply a giant Tobin Tax on the big four to slow them down and allow the second tier banks to overtake them.
The heat’s on across the pond too, via Banking Day:
The New Zealand directors of subsidiaries of the Big Four Australian banks have been put on notice by the new Reserve Bank of New Zealand governor to ensure they are acting in New Zealand’s interests and in tune with New Zealand’s banking culture, not that of their parents across the Tasman.
At a media conference following his first monetary policy statement (in which the OCR was left unchanged at 1.75 per cent), Adrian Orr said the culture of the kiwi subsidiaries “have to be for New Zealand and consistent with our culture and expectations”.
He said the directors needed to “work with their banks and their CEOs to make them understand ‘you are in New Zealand'”.
Asked by Banking Day if he was surprised by the revelations of banking misconduct emerging from the Hayne royal commission, Orr said he was, but added the central bank (which also has the responsibility for banking regulation in New Zealand) had “upped” its work around banking culture.
“What I want to say is ‘we understand, we know, we are doing our job’.”
And to the banks, Orr said the message was: “show us how it is different to what we are hearing from Australia – and we will be playing that out very clear and publicly.”
Break ’em up.
