The third quarterly report on the progress of the Australian banking
industry in implementing its package of initiatives to better protect consumer interests was released today.
The six initiatives, announced by the Australian Bankers’ Association (ABA) on 21 April 2016, were:
1. Reviewing product sales commissions and product based payments;
2. Making it easier for customers when things go wrong;
3. Reaffirming support for employees who ‘blow the whistle’ on inappropriate
conduct;
4. Removing individuals from the industry for poor conduct;
5. Strengthening the commitment to customers in the Code of Banking
Practice; and
6. Supporting ASIC as a strong regulator.
The report says it is encouraging to see that the banks are continuing to take steps, including through the use of pilot studies, which are consistent with the objectives of the industry initiatives and overall purpose of the reform program.
Examples of such measures brought to the attention of this review include:
- Westpac has elected to remove all product related incentives, including any incentives for referrals, for the 2,000 tellers in theWestpac branch
network. From 1 October 2016, incentives for tellers are now based entirely on customer feedback.- ANZ has conducted a ‘test and learn’ pilot in one of its Retail Banking districts over the past 15 months to trial a different approach to front line
incentives and measuring performance. During the trial staff performance measures and objectives were changed, with sales targets removed from incentive plans and replaced with customer-based metrics. ANZ has advised that the results, while not conclusive, lend support to the view that incentive plans may be best where they are based around whole of role performance.- CBA is establishing a process to proactively identify when customers are in vulnerable circumstances to tailor its processes based on their needs. The
goal is to allow the bank to identify multiple areas across the organisation where those customers may need special attention, either in the processes they go through or in the outcomes they receive.- NAB has established a Voice of the Customer review to allow the bank to improve its own processes and make things easier for the customer going forward. This is a retrospective review, undertaken on resolved complaints, specifically so that the true voice of the customer is considered in the root cause analysis of customer complaints.
These case studies demonstrate in a very tangible way a commitment by individual banks to improve performance by varying existing policies and/or piloting new approaches, consistent with the industry objectives.
They also demonstrate the multi-faceted nature of some of the challenges facing the industry, and how pilot approaches can inform longer-term solutions and encourage banks more broadly to review opportunities for improvement consistent with the industry objectives.
The extent of changes required by individual banks is likely to vary significantly, but will not be known until after the industry policy positions have been settled.
It is increasingly apparent, however, that banks will need to reassess the clarity of their service commitment to customers in the light of the industry’s initiatives, with revisions reflected in bank policies, training and behaviours at all levels, if the desired outcomes of the industry reforms are to be achieved.
This year will be critical to the industry and individual banks in:
- making the decisions and policy changes required;
- instituting the arrangements necessary for implementing, and embedding the new approaches to achieve the industry objectives; and
- reporting on progress so that customers, stakeholders and the wider community can be better informed about the impact of the industry’s initiatives.
The report says there remains a significant body of work to be completed, including:
- to settle industry policy positions and staged approaches toimplementation;
- for individual banks to review and, as appropriate, revise their policies andprocesses;
- for such policies to be embedded successfully into banking practices; and
- for sufficient information to be reported periodically on industryperformance, to build confidence that the initiatives are having the desiredeffects on institutional behaviour and customer outcomes.
The next report (Report 4) is scheduled to be delivered by 21 April 2017, 12 months following the industry announcement.
The ABA commenting on the report said:
The Australian Bankers’ Association has welcomed today’s release of Mr Ian McPhee’s progress report which showed banks are delivering meaningful change in order to rebuild community trust.
Mr McPhee has recognised good progress has been made by the industry, but also acknowledged there are a range of complexities with the initiatives and multiple stakeholders involved. The completion of some reforms is dependent on third party and government input.
The report also provides examples of how banks have taken early steps to improve practices, in areas such as how they pay staff and handle customer complaints.
ABA Executive Director – Retail Policy Diane Tate said it was encouraging that Mr McPhee had recognised banks’ efforts to make banking better.
“The industry is working hard to deliver on our commitments in the reform package. We have allocated additional resources where needed in order to maintain momentum.
“During the past quarter, a number of milestones have been achieved. For example, the industry released new guiding principles for banks to ensure their whistleblower protections meet the highest standard,” she said.
“Banks are improving the way they handle complaints with the appointment of customer advocates. The industry will also continue to support a new and improved external dispute resolution system, to simplify the current process and make it available to more consumers and small businesses.”
Ms Tate said the industry looked forward to receiving the final report from the independent reviews into retail bank staff pay and incentives, and bank conduct standards in the Code of Banking Practice.
“The findings of these reviews will be an important impetus for change. But we are not sitting on our hands. Banks are working on how they can improve their commitments to customers, including small businesses, and promote ethical behaviour of staff.
“We are also continuing to work on the best way to measure the success of our reforms,” she said.
