Day 313: 'Mixing it with the big end of town'
An introductory weekday newsletter from Schwartz Media. Counting the days since the banking royal commission was established.
Good afternoon and welcome to day 313.
Today in summary: new penalties for white collar criminals are on the way as the government talks up its willingness to jail bankers; former ACCC chair Graeme Samuel says lessons from the banking royal commission are likely to be short-lived; and risk managers in Australian banks aren’t ready for a major economic downturn, according to ANZ’s former chief risk officer.
-- Charis
Current banker panic level: 😨😨
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The government will this week introduce new legislation to increase penalties for white collar crime. Treasurer Josh Frydenburg told 2GB the clampdown should be an effective deterrent to misconduct in the banking sector.
“We’ve dramatically strengthened the criminal and civil penalties for corporate and financial misconduct. Just because you wear a suit to work doesn’t mean you’ll escape jail. Under these new laws, people will face up to ten years imprisonment for financial misconduct.”
Graeme Samuel is bearish on any likelihood the banking royal commission will have lasting effect, telling a conference this morning such lessons were often quickly forgotten, and misconduct almost certain to repeat. Samuel, in addition to being a former chairman of the ACCC, was a panel member for the APRA investigation into culture, accountability and governance at the Commonwealth Bank. He warned of regulators being captured by industry, and suggested a specialised group of judges with expertise in complex corporate and securities law be established to rule on misconduct cases.
Australian banks are almost a decade behind their international peers in fixing their culture and improving risk management capabilities, according to former ANZ chief risk officer Mark Lawrence. Lawrence said while the royal commission has exposed risk management failures across the industry, there had been no real "burning platform" to stir reform like the 2008 financial crisis did overseas.
"When you work on culture over many years you understand that in banks where the risk culture is strong, there is a force acting within the organisation that mitigates and works to actively prevent much of what we're seeing."
"However, unless the CEO makes culture a real priority it won't happen. It will just be a bunch of bullet points stuck on the wall on conference rooms."
Today’s burn prize: ASIC and APRA
🔥🔥🔥
"The invitations to entertainment events, the private luncheons, in fact anything that gives the vulnerable regulator the satisfaction or inner glow that they are mixing it with the big end of town,.”
Former ACCC Chair Graeme Samuel on the risk of regulators falling prey to industry capture.
“What we've seen with ASIC and APRA is two regulators who have actively colluded with criminality conducted on a industrial scale. It is widespread, it is endemic and it is systemic."
Andy Schmulow, Senior Lecturer, University of Woollongong Law School
The Commentariat
Graeme Samuel is right when he says the shock of the royal commission will wear off, writes the Sydney Morning Herald’s Stephen Bartholomeusz.
“History does repeat despite the efforts of legislators.”
He says Samuel’s experience enables him to put forward some sensible suggestions for regulatory change. These include tasking the ACCC with stress-testing the competitive implications of proposed regulatory actions and advocating for competition within the Australian Council of Financial Regulators (CFR).
For the reading list
The high cost of high finance
Howard Davies, Chairman of the Royal Bank of Scotland, and first Chairman of the UK’s Financial Services Authority, sounds a sombre warning for economies hosting a super-sized financial sector.
‘Like supporting a football team’: why whistleblowers are shunned at work
An interview with former Olympus chief and whistleblower Michael Wood on the need for greater protections for those who blow the whistle on corporate fraud.
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We’re not here to offer opinion, simply to cut through the noise, and help you make sense of the emerging policy and market trends you need to be across. We call it pure intel. You can read more about us here.