19 May 2016
Sydney, 20 May 2016: The Australian Bankers’ Association has today announced the appointment of Mr Ian McPhee AO PSM to oversee the implementation of recently announced measures by banks to protect consumer interests.
“Banks have committed to addressing community concerns about bad apples in the industry, the handling of customer complaints, the treatment of whistleblowers and how staff are paid,” ABA Chief Executive Steven Münchenberg said.
“Banks also committed to appointing an independent expert to oversee implementation of those commitments. We are pleased that Ian McPhee has agreed to take on this role,” he said.
“Mr McPhee’s primary role will be to form an independent judgement of whether the banking industry is making appropriate progress towards delivering on its commitments, on the basis of the evidence provided by banks and consultations with a range of other interested groups, including regulators, consumer representatives, community organisations, unions and other finance sector representatives.
“Mr McPhee will report quarterly on the industry’s progress, with the first report to be released by 21 July 2016. Mr McPhee’s role will continue until the industry’s commitments have been substantially implemented.”
Mr McPhee has over 30 years’ experience working in the public sector and for ten years was the Auditor-General for Australia, retiring in 2015. He is currently a member of the International Ethics Standards Board for Accountants and a non executive director of a listed company outside of the finance sector.
Mr McPhee has also been a member of the Australian Accounting Standards Board and the Australian Auditing and Assurance Standards Board. In 2015, Mr McPhee received the Order of Australia Award for distinguished service to public administration, particularly in the areas of accountability and policy development.
A copy of Mr McPhee’s letter of engagement is available on the ABA website.
A summary of the banking industry’s commitments, announced on 21 April, is below.
Contact: Stephanie Arena 0477 470 677 or Nic Frankham 0435 963 913
1. Reviewing product sales commissions
- Building on the ‘Future of Financial Advice’ reforms, we will immediately establish an independent review of product sales commissions and product based payments with a view to removing or changing them where they could lead to poor customer outcomes. We intend to strengthen the alignment of remuneration and incentives and customer outcomes. We will work with regulators to implement changes and, where necessary, seek regulatory approval and legislative reform.
- Each bank commits to ensure it has overarching principles on remuneration and incentives to support good customer outcomes and sound banking practices.
2. Making it easier for customers when things go wrong
- We will enhance the existing complaints handling processes by establishing an independent customer advocate in each bank to ensure retail and small business customers have a voice and customer complaints directly relating to the bank, and the third parties appointed by the bank, are appropriately escalated and responded to within specified timeframes.
- We support a broadening of external dispute resolution schemes. We support the Government’s announcement to conduct a review into external dispute resolution, including the Financial Ombudsman Service conducting a review of its terms of reference with a view to increasing eligibility thresholds for retail and small business customers.
- We will work with ASIC to expand its current review of customer remediation programs from personal advice to all financial advice and products.
- We will evaluate the establishment of an industry wide, mandatory last resort compensation scheme covering financial advisers. We support a prospective scheme being introduced where consumers of financial products who receive a FOS determination in their favour would have access to capped compensation where an adviser’s professional indemnity insurance is insufficient to meet claims.
3. Reaffirming our support for employees who ‘blow the whistle’ on inappropriate conduct
- We will ensure the highest standards of whistleblower protections by ensuring there is a robust and trusted framework for escalating concerns. We will standardise the protection of whistleblowers across banks, including independent support, and protection against financial disadvantage. As part of this, we will work with ASIC and other stakeholders.
4. Removing individuals from the industry for poor conduct
- We will implement an industry register which would extend existing identification of rogue advisers to any bank employees, including customer facing and non-customer facing roles. This will help prevent the recruitment of individuals who have breached the law or codes of conduct.
5. Strengthening our commitment to customers in the Code of Banking Practice
- We will bring forward the review of the Code of Banking Practice. The Code of Banking Practice is the banking industry’s customer charter on best practice banking standards, disclosure and principles of conduct. The review will be undertaken in consultation with consumer organisations and other stakeholders, and will be completed by the end of the year.
6. Supporting ASIC as a strong regulator
- We support the Government’s announcement to implement an industry funding model. We will work with the Government and ASIC to implement a ‘user pays’ industry funding model to enhance the ability for ASIC to investigate matters brought to its attention.
- We will also work with ASIC to enhance the current breach reporting framework.
Access to credit opens up opportunities and fulfills aspirations. Getting it right requires the right balance between consumer protections and the flow of credit.
Interviewed by AM’s Peter Ryan, ABA CEO Anna Bligh talked about the substantial drop in loan deferrals since their peak during the pandemic, falling from 900,000 to 300,000.