An independent review of retail banking product commissions and payments has described the change in culture and practices as a “substantial achievement” that will improve outcomes for customers.
The Australian Banking Association said on Wednesday that independent expert Stephen Sedgwick has completed his review of the retail banking industry and confirmed that the “real change” has occurred.
He concluded that the risk of mis-selling and poor outcomes for customers - highlighted during the Hayne royal commission - has been “substantially reduced”
Further, the former Australian Public Service commissioner noted that the industry has accepted and delivered against his 2017 recommendations that mutually reinforcing reforms were generally required to the culture, management, and remuneration of retail bank staff. "These are substantial achievements, supported by substantial investments by many banks to better articulate a customer-centric ethos and to build leader and manager capability in support of it," he said in the ABA release.
"However, while substantial change has been achieved, it needs to be supported as time passes by continued vigilance of bank management, boards, and regulators.”
In 2016, the commissioned Sedgwick to carry out a review of pay practices for frontline banking staff and recommend reforms.
Last year, he started an assessment of the reform program to see how the banks were faring.
The final review found that bank policies have changed in line with his recommendations.
This was also confirmed in an ABA survey, which showed retail staff believed that their bank was more customer-centric than sales-centric.
Link between pay and sales rare
The main findings of the final review were that links between pay and sales were now rare and only indirect when they were present, and toxic mechanisms like accelerators linked to sales have gone. Performance reviews of employees and variable rewards were now typically assessed on a “whole of role” basis, including how results were achieved as opposed to sales performance.
Both the “what” and the “how” were assessed to minimise the risk that good sales through poor behaviour was rewarded.
Further, Sedgwick noted that many banks have invested heavily in refreshing their values, consequence management framework, cultural expectations, and leader, manager, and staff capability to strengthen the focus on the customer.
ABA chief executive Anna Bligh said this final review by Stephen Sedgwick demonstrates that banks have kept their promise to stop poor remuneration practices and put the customer first.
“Today, as seen in this final review, I believe banks are demonstrating they have heard the community and have moved to change the culture of banking," she said.
“While there is always work to be done, the banking industry has come a long way since 2017 in earning back the trust and confidence of Australians.”
Bligh said the banks had already introduced many measures and changes, including a new Code of Practice, no longer paying retail banking staff based directly or solely on sales, and refocussing workplace culture on the customer.
As for remuneration practices, she said the ABA and its member banks will now consider an appropriate mechanism to regularly monitor the sustained and ongoing adherence to these improved pay practices across the industry.