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Who is really responsible for compliance?

“Compliance is good for business,” former ANZ chief executive Mike Smith told me when I took the role of chief compliance officer at the bank back in 2013.

" Despite an apparently antagonistic relationship between banks and regulators, there is in actual fact a lot of common ground."
Mark Evans, Chief compliance officer at ANZ

At that time, the aftereffects of the global financial crisis were still fresh and multi-million dollar fines for rogue organisations were an almost weekly occurrence. It was obvious Smith was right.

As bankers, we want to do the right thing for our customers and wider society – no-one wants to be picking the pieces up if things go wrong.

This means we have to make sure we’re constantly asking ourselves whether the processes and activities we have in place lead to better decisions and are a fair reflection of the type of organisation we want to be. Conversely, we also need to ensure if things do go wrong, we are able to move to address issues if they arise.

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ONE AIM

A key way to prevent issues before they occur is by building a healthy culture. This was a key part of the speech APRA Chairman Wayne Byres delivered at the AFR Banking and Wealth Summit I attended in April. He identified culture as one of four areas banks need to improve to help ensure that overall health of our banking system.

“Regulators have certainly put culture in the spotlight, it is the industry that needs to do something about it,” he said. “There are good signs this is happening.”

This is important for me, as despite an apparently antagonistic relationship between banks and regulators, there is in actual fact a lot of common ground.

Both banks and regulators want an open, transparent financial services system, and we’re both a lot more interested in preventing poor corporate behaviour before it happens, than cleaning up afterwards.

TRUST AND CONFIDENCE

It was something I had the opportunity to discuss in a roundtable session at the Summit with another regulator, Peter Kell, the Deputy Chairman of ASIC, as well as Professor Elizabeth Sheedy, Macquarie University Department of Applied Finance and Actuarial Studies,an authority on corporate culture.

In his opening remarks, Kell said that culture is a vital part of building trust:

“ASIC has been highlighting the importance of culture in financial firms. Our aim is to promote trust and confidence in the financial system, and poor culture clearly undermines that trust and confidence,” he said.

Like Burns, Kell highlighted the importance of strong culture and banks aligning the way in which we operate with the interests of customers. I couldn’t agree more.

At ANZ we’re passionate about putting our customers at the heart of what we do, whether it’s through offering new products such as ANZ Apple Pay or joining an industry-wide initiative to improve the way we treat customers and resolve issues.

At the Summit, NAB chair Ken Henry went as far as to suggest a completely customer-centric bank would have no need to worry about conduct or prudential regulation. I’m not sure I would go that far – banking is a complex industry which requires independent oversight.

Nevertheless, the requirements of regulation are growing. In fact at another event I attended, it was highlighted that on average, 170 laws relating to banking are updated each day, compared to six or seven a day six years ago. There was some discussion at the Summit around the potential impost, however, of meeting these requirements.

MEETING REQUIREMENTS

So how do we meet the requirements of rapidly changing legislation, while also simplifying our business?

At heart, it is about culture – and a good culture will flow from good management practice. We can see this in many different ways, whether it’s ensuring we have the right level of diversity to ensure a corresponding diversity of opinion, ensuring we reward both what people achieve but also how they go about it, or offering the right training. We also have to make sure that we have processes to ensure people can speak up.

One area through which we’ve been working on this is our internal whistleblower protection policy. At ANZ, we offer employees an independent reporting service, managed by a third party to guarantee anonymity if required.

Our policy is benchmarked against global corporates - not only other banks - and considered best practice. We’ve also been participating in a survey led by Griffith University to look out how we broaden awareness and understanding of what makes a good whistleblower policy.

It’s one of the key aims of the banking industry-wide action plan announced last month, to demonstrate how we’re working improve the way we deal with customers and resolve issues. It’s this kind of activity, driving better, simpler processes, which help build the trust of employees, regulators and customers.  

Mark Evans is chief compliance officer at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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