The Australian Royal Commission into the financial services industry is entering its final phase but it is already having a profound impact on the Australian financial sector – and not just in how banks manage misconduct, but in how they are regulated as well.

To this point, following on the Interim Report from the commission, the Australian Financial Review offered an editorial on how the Commission will potentially change how regulation is handled in Australia. The report, published this past September, had an implicit message that “…trust in the banks won’t be restored unless the public trusts their watchdogs to enforce the laws of the land.” Initiatives such as the Royal Commission are finally recognizing that misconduct is not a problem of lone wolf actors. Rather, it is a systemic problem that requires both banks and regulators to adopt new strategies to manage.

The final report is due in February and whatever that report says, it’s clear that banks should expect greater enforcement efforts from ASIC and APRA and that “more legal cases, especially criminal matters, will sharpen the focus of boards and management on risk culture, and send a strong message to the public that misbehaviour is not tolerated, while acting as a deterrence.” In fact, the new Bank Executive Accountability Regime (BEAR) will hold individual executives liable for failures to provide adequate oversight.

The G30 adopts a similar philosophy to the Hayne interim report. They suggest in their most recent whitepaper titled Banking Conduct and Culture Change: A Permanent Mindset Change that stamping out misconduct doesn’t require extensive new regulation. Instead, the regulators will be looking to the banks to come up with better measures for and means (i.e. technology and tools) of managing such risks.

Read the article (paywall): Banking royal commission: How Hayne will change the regulation of banks