Making bank employment undesirable

Will the Government’s Bank Executive Accountability Regime combine with the Australian Bankers’ Association employment protocol to make employment in the banking sector a less attractive option? Mike Taylor asks.

Before everyone gets carried away with the sport of kicking the major banks, a note of caution must be sounded about with respect to the adoption of highly discriminatory practices which risk causing long-term damage to a key segment of the financial services industry.

As well intentioned as the Government’s Bank Executive Accountability Regime (BEAR) and the Australian Bankers’ Association’s (ABA’s) new conduct background check protocol may be, they are undeniably singling out a group of workers for exceptional and some might say draconian treatment.

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Money Management has been front and centre in lamenting the poor culture and practices which have given rise to the many scandals which have plagued the financial services industry over the past two decades, but the Finance Sector Union (FSU) is right to raise its concerns about the nature of the remedies now being proposed.

Indeed, those advocating the remedies might also pause to consider the wider of implications of their proposals, not least the reality that they may act as a significant impediment to attracting and retaining the best and brightest talent.

Given a choice between working for a bank or a major insurer, which bright and upwardly mobile executive would choose the former with all the BEARish consequences such as regulatory vetting and remuneration oversight when working for an insurer, fund manager or custodian carries no similar requirements?

Equally, the FSU has good reason to be worried about the application of the new ABA protocol because it will force applicants for jobs in banks and financial institutions to consent to background checks to see if they have been dismissed or resigned during investigations into their conduct in previous jobs.

Taken together, the BEAR and the ABA’s new bank employee protocol will serve to give the banking industry many of the same characteristics as the police and security services, where those seeking to enter the regime do so in the knowledge that they are going to be background-checked and their conduct subjected to ongoing scrutiny.

Perhaps, when dealing with other people’s money, this should always have been the case. Perhaps the requirements for entry into financial services employment should be higher than that for other sectors of the economy.

There can be no doubting the need to eliminate the so-called “bad apples” from the banking and financial services industry and the financial advisers register now maintained by the Australian Securities and Investments Commission (ASIC) was established as a direct result of the many instances of recalcitrant advisers moving from one licensee to another.

Given the far-reaching consequences of the Bank Executive Accountability Regime and the ABA protocol, it is imperative that they are seen to be both objective and fair.

The Bank Executive Accountability Regime will be overseen by the Australian Prudential Regulation Authority (APRA) and should therefore be regarded as an objective and impartial exercise. The ABA protocol will be managed by the banks.

Given the scope for unintended consequences and the need to avoid unnecessary litigation, the ABA would do well to consider the FSU’s suggestion that its protocol be the subject of a Government-administered process in similar fashion to the ASIC financial advisers register.

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Mike, another top article! With the Bank of Canada now publicly acknowledging the risks associated with traditional mortgages and the timely introduction of BEAR in Australia it means that if class actions occur in the future executives will need PI cover. The Bank of Canada article and my comment can be seen here Keep up the good work.

Hiring a bank financial planner is quickly becoming like hiring an ex storm financial adviser. A high risk strategy regardless of their skills.

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