Mutuals not immune to risks, says ASIC

Addressing the 2015 Customer Owned Banking Convention in Darwin on Monday, ASIC commissioner John Price said that the regulator has enjoyed a productive and cooperative relationship with the mutual banking industry over the last 15 years.

Mr Price praised the industry’s core values of mutuality, cooperation and self-help.

Speaking about the regulator’s focus on culture and trust in the financial service industry, the commissioner emphasised that ASIC expects firms to ‘do the right thing’ by their customers and comply with the law.

“Where culture is poor or not aligned with customers’ reasonable expectations, the conduct of the entities ASIC regulates can lead to less than satisfactory consumer outcomes,” Mr Price said.

“The mutual industry is not immune from these risks.”

ASIC is considering cultural indicators in its surveillance work, Mr Price said. While the regulator is specifically looking at culture as part of its surveillances, this is not new – ASIC has always considered indicators and factors that drive poor behaviour, he said.

“What we are doing in this culture work is ‘joining the dots’ on the very concrete aspects of the way firms operate to give us a better picture of their culture and how that might affect consumer outcomes,” he said.

“But our biggest focus when it comes to culture is to encourage organisations to reflect on their own culture, and how that might be going wrong and enabling or encouraging unfair treatment of investors and consumers.”

Poor culture, together with poorly designed financial incentives, can be an indicator and a driver of poor conduct, Mr Price said.

“Identifying poor culture can help with detecting not just individual instances of misconduct, but broader, more systemic problems.”

Mr Price said he believed that mutuals are well placed to take advantage of their unique structures to nurture consumer trust and confidence, as “the very foundations on which you are built are all about mutual wellbeing and cooperation.”