Ravi Menon, giving a keynote address on ‘Financial regulation – the forward agenda’ in Australia earlier this week, said coordinated reform was still urgently needed nine years on from the global financial crisis.
“In the US and UK, major retail banks are still settling charges against them for mis-selling investment and insurance products in the run-up to the financial crisis.
“Across financial centres, traders at several banks were found to be involved in flagrant manipulation of key financial benchmarks.
“Internationally, regulators have been cracking down on illicit fund flows, with several financial institutions being penalised for lapses in money laundering controls”, he said.
His speech, at the Australian Securities and Investments Commission (Asic) Annual Forum 2017, also covered what needs to be done to improve the situation.
“Reform of the financial industry will not be complete until this issue of trust and ethics is addressed. We need to ‘get the culture right’. This will require collective effort by regulators, the industry, and financial institutions.”
Menon said ultimately it is the financial institution itself that must bear responsibility for getting the culture right, by setting a clear tone from the top that is supported by concrete policies and leaders that walk the talk.
“Second, align human resource policies with the desired culture. From recruitment and training to rewards and penalties, compensation to career development, HR policies send the clearest signal to staff on the values that the firm regards as important.
“This is difficult but important work. We must move the financial industry to look beyond the question ‘is this legal’ to the larger question ‘is this right’.”