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Bank commission reforms hit stumbling block
The Australian Bankers Association’s (ABA) bid to reform staff sales commissions may miss next year’s implementation date.
The latest independent governance review, by former auditor-general Ian McPhee, says data on product sales commissions has proved more extensive than expected.
“Additional resources were put in place once the full data collection requirements became apparent, and this is why the delivery date for this milestone has not been revised at this stage,” the review says.
“Program co-ordinators are closely monitoring developments on this front.”
Half of the 20 banks participating in the ABA governance initiative have raised no implementation risks associated with introducing a new pay structure. The rest flag risks for smaller banks in staff retention and the failure of all banks to agree on the reforms.
Banks have told Mr McPhee they are taking their own steps to change remuneration and incentive packages, including using internal experts to contribute to an independent review while collating information and data.
They are also changing the performance and reward framework to increase the focus on risk management and customer outcomes. This includes reweighting of sales objectives in a balanced-scorecard approach that will underpin performance management systems.
Banks are also reviewing total reward packages, to better understand what motivates sales performance.
Another initiative facing delays is the removal of individuals from the industry due to poor conduct. Mr McPhee says complex legal issues could delay any implementation date.
ABA Executive Director, Retail Policy Diane Tate says the banking industry is acting to better protect customers.
“Banks have made good progress [with the initiatives] but recognise there is more to be done to make sure the initiatives are implemented successfully,” she said.
“The report shows that some milestones have been completed ahead of schedule, while others – some of which are contingent on government and regulatory reviews, and some which require thorough stakeholder engagement – will need additional focus to meet target dates.”
Mr McPhee will deliverer his next review of the governance initiative by January.