A new, independent report by former public service commissioner Stephen Sedgwick was released today. It found that the banking industry is mostly “on track” to meet a 2020 deadline to overhaul problems in remuneration structures.
Key findings from today’s report include:
- Banks have reduced the use of bonuses based on financial incentives for front-line staff.
- Bonuses for bank tellers, typically 10 per cent of fixed salary, are now generally based on broader customer service measures, with “sales-based” measures greatly reduced.
- Salaries for other bank staff are now more weighted towards fixed pay, rather than variable bonuses.
- Banks are retraining front-line staff to encourage a “customer first” approach, rather than a “sales first” mindset.
In scathing detail, the royal commission last year shed light on the problems associated with a sales-based culture, and remuneration and bonuses based entirely on sales figures.
However, this industry overhaul has been in the works since April 2017, with a view to “deliver better outcomes” to Australian consumers.
CEO of the Australian Banking Association Anna Bligh believes the full implementation by 2020 will ultimately see banks focusing on “what’s best for the customer and excellent service, rather than simply sales targets”.
Does it stack up?
Despite the findings of today’s report, the corporate regular has found that six Australian banks have yet to complete their reviews into “fee for no service,” an issue which was brought to light during the royal commission and have been on the regulatory radar since 2013.
AMP, ANZ, CBA, Macquarie, NAB and Westpac have been named by ASIC for not having completed the review to identify systemic ‘fees for no service’ failures beyond those already identified and reported to ASIC since 2013.
The main reasons for the delays are poor record-keeping and systems within the institutions, which have meant banks are unable to access customer files to review.
Since 2014, ASIC has supervised the ‘fees for no service’ compensation program of 32 licensees, and as of this year the big four plus AMP have collectively paid or offered approximately $350 million in compensation.
While the reviews are incomplete, the institutions have provisions for more than $800 million towards potential compensation for further systemic fees failures.