'Societal shift': ASIC warns companies to heed Hayne lessons
The lessons of the banking royal commission apply equally to companies outside the finance sector, underlining the need for all businesses to consider non-financial risks, the corporate watchdog says.
As banks feel the fallout from the Hayne royal commission, deputy chairman of Australian Securities and Investments Commission (ASIC) Daniel Crennan on Friday said all corporate businesses must be aware of a "societal shift" in public expectations of higher standards of conduct.
"The mandate of the royal commission was limited to financial services, but the philosophical underpinning of that analysis and the recommendations that arose from that analysis equally applies to all corporate activity,” Mr Crennan said at ASIC's annual conference in Sydney.
Karen Chester, also a deputy chair at ASIC, underlined the need for all corporate leaders to think about "non-financial risk," pointing to the massive financial pain the issue is causing banks. Ms Chester added there was a misconception among some that the obligations on directors under corporations law had changed - but this wasn't the case.
“When you look at what the obligations are under the Corporations Law, nothing’s changed,” she said.
“Your director or your company that doesn’t feel like they’re impacted by the Hayne royal commission because it doesn’t directly relate to them – it does. If you don’t manage these non-financial risks, if you don’t make sure you put the systems in place such that the CEO and the board know what they are, they pretty quickly crystallise into big financial risks and financial losses and provisioning that we’re seeing today.”
Mr Crennan and Ms Chester made the remarks in a wide-ranging panel discussion, in which ASIC chair James Shipton hit back at claims the regulator was being over-zealous in enforcing responsible lending laws in the mortgage market. He said fears of a crackdown on lending standards were "overhyped".
Mr Shipton said discussions with bank leaders had made it clear there was a “people-management leadership issue” to make staff in banks feel confident about operating in the law.
“But the responsible lending conversation, I think, has been overhyped. Because, of course, there is a huge demand side element that is factoring into the credit issue here,” he said.
“It’s far too simplistic, verging on incorrect to suggest that it was an ASIC action or a change of law because of course there hasn’t been a change of law.”