Yesterday, Stephen Sedgwick released the final report of his independent review into the product-based payments that banks offer their staff.
The report sets out 21 recommendations that are intended to improve trust in the banking industry. One of these involves the removal of incentives that are based directly or solely on sales performance.
Instead, the report suggests banks offer their staff incentive payments based on a range of factors, with one being product sales.
“It remains my view that there is not sufficient evidence of significant systemic risks of poor outcomes for customers to support an outright ban on all product based payments in retail banking,” the report said.
“Nonetheless, some current practices carry an unacceptable risk of promoting behaviour that is inconsistent with the interests of customers and should therefore be changed.”
Other recommendations call for banks to examine their workplace culture and institute formal processes to redress any conscious or unconscious bias towards sales in preference to ethical behaviour and customer service.
The report also recommends the Australian Bankers’ Association (ABA) to commission an independent reviewer in three years to report publicly about how well banks have changed their practices and implemented the recommendations, and assess whether further regulatory or legislative change is required.
The ABA has since announced support for the Sedgwick recommendations, saying the banking industry will implement them “in full” and “as quickly as possible”.
“Banks don’t underestimate the changes recommended by Mr Sedgwick. This will not be easy for banks and there will be challenges. Changes will need to be made to bank policies, workplace agreements, contracts, staff training programs, internal controls and performance management systems,” said ABA chief executive Anna Bligh.
“Banks have heard the criticism about the sales culture. The industry needs to embed a customer-focused culture so customers have confidence banks are doing the right thing by them.”
CBA, ANZ, Westpac and NAB have also announced they are committed to implementing all recommendations.
“We will implement many of the recommendations by 1 July 2017 and will have all changes in place by the following financial year,” said CBA chief executive Ian Narev.
The Sedgwick report recommends that all banks reach full implementation of the changes before 2020.
