If it already felt uncomfortably warm in financial services marketing, it’s about to get a whole lot hotter as the Federal Government’s Royal Commission into the banking industry kicks off a year of intense scrutiny with its first hearing on February 12.
That has followed numerous public hearings and three reports to the House of Representatives Standing Committee on Economics since 2016 examining a range of misconduct issues that have plagued the financial services industry, recommendations designed to improve consumer protection, and the banks’ response to those recommendations.
Last year’s federal Budget provided funding for a new financial services regulator, the Australian Financial Complaints Authority, which is due to begin operations in mid-2018 — a “one stop shop to deal with financial system complaints”.
And late last year, following continuing allegations of misconduct, the big four banks called for the Royal Commission as a means of ending “damaging” calls for inquiries, and continuing speculation and uncertainty about the regulatory future of the industry.
Never before has Australia’s financial services sector been put under the microscope in such a sustained and public way.
Banks on notice to improve risk management and compliance
If the misconduct scandals that have emerged have been shocking, the language in the Senate Committee reports has been damning:
“Over the last two decades Australia’s major banks have demonstrated that they have robust, forward looking, financial risk management frameworks,” one report found. “It is disappointing that the committee cannot say the same of the frameworks that are in place to manage risks that threaten consumers.
“For this reason, the committee recommends that each of the major banks be required to engage an independent third party to undertake a full review of their risk management frameworks and make recommendations aimed at improving how the banks identify and respond to misconduct.”
Culture, process and tools key to financial sector compliance push
The financial services industry has been told it must be “proactive” when it comes to avoiding the compliance breaches of recent years.
Culture, as well as process, is also under scrutiny, with banks on notice that a culture of accountability and transparency will be forced upon them if it is not adopted willingly.
Against the background of this turmoil, marketing teams will not simply find themselves communicating the changes affecting their industry, or creating campaigns aimed at rebuilding trust.
“You can’t comms your way out of a problem as big as the trust issue facing Australian banks at the moment,” Australian Bankers’ Association chief executive Anna Bligh told a finance marketing summit last year.
“There has to be real consistent and focused effort around culture and conduct and there has to be significant investment in new technology that will make the customer experience as good as it can be.”
That technology and those tools must extend to banks’ internal processes, and marketing must be part of a whole-of-business approach to overhaul and improve compliance and risk management.
And with further risk management regulation an ongoing threat, it won’t be enough simply to have marketing compliance processes in order – these must be easily tracked and auditable, and able to be shown to be fully operational.
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