Provide your feedback: potential areas of policy focus for AICD in response to the Royal Commission Interim Report

As noted in the AICD’s consultation paper, Commissioner Hayne declined the opportunity to present draft recommendations for policy reform, instead outlining a series of (often broadly expressed) questions. This suggests that he is open to public consultation and wishes to ensure that his ideas are well-tested before formulating recommendations. The final report (due 1 February 2019) is likely to draw significantly on the submissions received in response to the interim report, as well as the November 2018 round of policy-focused hearings.

Chapter 10 of the Interim Report highlights a number of questions which the AICD may wish to submit on. The main questions, grouped by theme, are set out below. Also outlined below are the relevant policy questions raised in relation to the insurance hearings that apply to the financial services sector more broadly.

We welcome member input. Please provide your views in the text boxes below each question. You can answer some or all of the questions. 

 
 
 
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Causes of misconduct

 
 
 
1. What should either or both of banks and regulators be doing to the meet the danger of conduct risk?
 
 
 
 
 
2. Should any customer facing employee be paid variable remuneration? If the answer is either no or some should not, what follows about incentive remuneration for managers or more senior executives?
 
 
 
 
 
3. Should other changes be made to the remuneration practices of banks?
 
 
 
 
 
4. Is the Banking Executive Accountability Regime (BEAR) relevant to the intersection between remuneration and culture more generally than its application to particular senior executives? Should the BEAR be altered or extended in application?
 
 
 
 
 
Regulation and the regulators 
 
 
5. Should there be annual reviews of the regulators’ performance against their mandates? Is ASIC’s remit too large?
 
 
 
 
 
6. Are ASIC’s enforcement practices satisfactory? If not, how should they be changed?
 
 
 
 
 
7. If the recommendations of the ASIC Enforcement Review are implemented, will ASIC have enough and appropriate regulatory tools?
 
 
 
 
 
8. Should ASIC’s enforcement priorities change? In particular, if there is a reasonable prospect of proving contravention, should ASIC institute proceedings unless it determines that is in the public interest not to do so?
 
 
 
 
 
9. Are APRA’s regulatory practices satisfactory? If not, how should they be changed?
 
 
 
 
 
10. Does the conduct identified and criticised in the report call for reconsideration of APRA’s prudential standards on governance?
 
 
 
 
 
11. Having examined the governance, culture and accountability within the CBA group, what steps (if any) can APRA take in relation to those issues in other financial services entities?
 
 
 
 
 
Questions raised in relation to Round Six (insurance) hearings – which also apply to financial services more broadly 
 
 
12. What is the purpose of infringement notices? Would that purpose be better achieved by increasing the applicable number of penalty units in section 12GXC of the Australian Securities and Investments Commission Act 2001 (Cth)? Should there be infringement notices of tiered severity?
 
 
 
 
 
13. Is there sufficient external oversight of the adequacy of the compliance systems of financial services entities? Should ASIC and APRA do more to ensure that financial services entities have adequate compliance systems? What should they do?
 
 
 
 
 
14. Should there be greater consequences for financial services entities that fail to design, maintain and resource their compliance systems in a way that ensures they are effective in:
• preventing breaches of financial services laws and other regulatory obligations; and
• ensuring that any breaches that do occur are remedied in a timely fashion?
 
 
 
 
 
15. When a financial services entity identifies that it has a culture that does not adequately value compliance, what should it do? What role, if any, can financial services laws and regulators play in shaping the culture of financial services entities? What role should they play?