Hayne’s ‘Fall Out’ falls forward to the future

Characterised as the ‘Hayne Fallout’ Summit, the Annual AFR Banking & Wealth Summit, in association with Deloitte, was a harder hitting, leaner and when it came to ASIC Chair, James Shipton’s segment, a ‘meaner’ version, of summits of years’ past.

As Deloitte Financial Services Industry Leader, Arthur Calipo, points out, we value the Summit as an opportunity to stimulate the exchange of ideas and debate among industry participants, and we were not disappointed.

There was never any doubt this year’s Summit would focus on the carrots of ‘unquestionably good’ culture, fairness, trust and trustworthiness, and the stick of ‘why not litigate?’

And it was. What was new though, was ‘how’, and that’s the clarity the panellists and key speakers provided.

The new ASIC enforcer, Deputy Chair Daniel Crennan QC was at pains to point out that the much heralded ‘why not litigate?’ does not mean ‘litigate first’ or ‘litigate everything’. But he didn’t shy away from using litigation as an active tool.

Nevertheless, the equally hard-hitting Professor Graeme Samuel AC explained that litigation was ‘just one of many tools in the toolshed’.

The former competition regulator and chair of the APRA capability review told AFR columnist Jennifer Hewitt in no uncertain terms, that ASIC had gone through a very substantial renovation, and developed its new culture “not in 10 years, but in months.”

He described ASIC’s approach in two stages. Stage 1 – perception and giving the impression of ‘fire and brimstone’. This was very clear from a deliberately delivered harangue from ASIC Chair James Shipton on Day 2, when in schoolmasterly tones he intoned the six principles of Commissioner Hayne, stressing the simple injunction to ‘obey the law’ (read more here). Stage 2 is about the reality.

Unintended consequences

The issue of ‘unintended consequences’ was also live at the Summit, with Westpac’s David Lindberg, soon to be CEO of the Consumer Bank, talking to his previous role as CEO of the business bank, pointing to business borrowing flat lining due to ‘micro-prudential regulation’ and the stricter interpretation of responsible lending combined with human fear.

Fear was also called out by Deloitte Governance, Regulation and Conduct Partner Karen Den-Toll on a panel with former APRA Deputy Commissioner Fahmi Hosain, now CEO and founder of Rhizome, when she talked to the power of the new Banking Executive Accountability Regime (BEAR) and its ability to ‘make good people nervous’. See her ‘When BEAR becomes FEAR’ blog here. She said: “We all rationally understand how we’ve come here, but … people can end up in paralysis in their decision-making.”

A similar point of unintended consequences was picked up by Deloitte Senior Risk Advisor Kevin Nixon, when he said ‘constant litigation isn’t necessarily the answer as it fails to restore trust’.

“The last thing you want is litigation after litigation after litigation. That doesn’t restore trust to the industry because it reinforces the idea that there’s bad behaviour continuing to happen. And it doesn’t restore trust in the regulators either.”

Australian Banking Association’s CEO Anna Bligh agreed. She said: “Constant litigation for litigations sake” would not help trust.

Open Banking

Deloitte’s Open Banking Leader Paul Wiebusch also spoke of the need to be careful of ‘unintended consequences’ when implementing Consumer Data Rights (CDRs) and the need to think about the interaction with other legislation, including conduct, AML and price comparison. “With the absence of a holistic view, there is a risk of unintended consequences.” See ANZ cautious on client data – AFR P6 Banking & Wealth Summit.

Scott Gregson ACCC EGM who is regulating the Open Data legislative change (see Deloitte Open Banking pages here) explained how the Consumer Data Rights will work and that ‘if we build it, the examples will come.’ He said: “We are very much of the view if this data is available to trusted, accredited third party providers, new services will evolve.” And as it moves from one industry to the next, ‘the potential to combine it for the benefit of the customer will increase.”

Scott Gregson, Emma Gray, ANZ Chief Data Officer, Drew McRae policy officer at the Financial Rights Legal Centre, and Damir Cuca the founder of Basiq, an open banking platform in which the venture capital funds of Westpac and NAB own a stake, were quizzed at the end of their Open Banking panel as to whether they would hand over their data. Scott said ‘yes’; Emma: ‘Depends to whom’; Drew, ‘no’; and Damir ‘yes’.

As we imagine the future, one in Anna Bligh’s world where we are both ‘unquestionably strong’ and ‘unquestionably good’, or David Murray’s where good systems create good culture, not regulators, it will be smart analytics, open data, AI, cognitive technologies and above all ‘good judgement’ that will enable the change.

A change, according to Steve Weston’s neo Volt Bank, Tommy Mermelshtayn’s buy-now-pay-later provider Zip, Futurist Rocky Scopelliti and Lee Hatton’s U-Bank, that will be tailored to the Millennials. As Scopelliti said of the Millennials, their money and their mobiles – we only have to look to China and Asia to see how we need to separate purchasing a financial product (manufacturing) from participating in the experience economy (distributing). He said, “Millennials have tools that separate the two.” See WEF report The New Physics of Financial Services.

Weston said the future of banking will involve delivering a ‘goodie bag’ of solutions tailored to Millennial customers.” One where someone tells you how good it is. And one Hatton concluded is predicated on the value of being made ‘simple for me’ and ‘easy for me.’

In this way we will leave the Hayne fall out of hefty regulatory change, and fall forward into a future where banks according to Bligh accept responsibility to reach out to prevent customer issues before they arise. And as Deloitte CEO Richard Deutsch said when he opened the Summit, “We are on the cusp of a new era, and with purpose will build a new legacy of which we can all be proud.”

 

 

Download the Summit highlights

See our Royal Commission pages here.

 


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