Balancing Culture with Regulatory Compliance

The Hayne Royal Commission made a series of recommendations to the Australian Federal Government which included extending the Banking Executive Accountability Regime (affectionately known as BEAR).


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The Hayne Royal Commission made a series of recommendations to the Australian Federal Government which included extending the Banking Executive Accountability Regime (affectionately known as BEAR). Ensuring a clear standard of conduct, BEAR sought to impose greater framework for senior finance executives with a clear mission to improve accountability to the end consumer, thanks to more stringent regulation. Additionally, the proposed extension of BEAR with the Financial Accountability Regime (FAR), sets out standards for conduct and severe penalties for ‘accountable persons’ should this layer of responsibility not be met.

The question remains as to how this is impacting upon the retention and acquisition of senior talent within financial institutions. With potential new accountability responsibilities to ensure each person takes reasonable steps to ensure compliance with its licensing obligations, comes an increased obligation on the individual to comply with increasingly onerous red tape. At what point does senior executive talent either not join the sector or leave it because of the personal risk associated with these regimes?

Undoubtedly, a critical need remains for transparency and honest cultural behaviour within banks and financial services organisations. Cultural standards within each financial services organisations should demand that Executives ‘do the right thing’ and act within the confines of moral accountability and regulatory requirement, without such a stringent need to regulate so heavily. The fear is that any further legislation may impact upon both current and future talent pools, across all levels of an organisation.

An organisation’s culture is built and developed from the top down and critically impacts upon their ability to attract and retain top talent. It’s the role of senior leaders to set the tone for the type of behaviours they expect to encourage from their leadership team, with some bank boards over the past few years not paying bonuses to the entire Executive team in a show of force to promote their values and expectations.

Forward thinking banks are additionally structuring renumeration in such a way to promote the right behaviours, to encourage Executives to comply with regulation and by ensuring that they are renumerated only on those areas within their direct control. Whilst there’s little organisations can do to change regulatory compliance, impactful behaviour setting and cultural growth can go a long way to attracting and retaining talented individuals.

A culture which penalises Executives for activities outside of their control, is unlikely to attract talent and generate a new cohort of emerging talent. The danger of not proactively managing such a culture, is that high performing Executives are likely to move to a culture or industry in which they’re empowered to deliver, without onerous and productivity stifling regulation.

The key is to start weaving regulatory compliance into the fabric of banking operations, to set the precedent for a cultural norm of appropriate behaviour in banking. As customers, we rely heavily on the strength of our financial institutions to deliver reliability, transparency and dependability – traits which can only be delivered with a delicate balance between regulatory obligations and clear commercial and cultural strategies and the talent being available!

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