Wayne Byres notes ‘reasonable’ royal commission conclusions, says fintech alone can’t fix bank woes

APRA’s boss has stressed the limits of a tech solution to the sector’s woes as he noted Hayne’s “reasonable” suggestions.

chairman of the Australian Prudential Regulation Authority Wayne Byres. Hollie Adams/The Australian

APRA chair Wayne Byres has emphasised the importance of human decision making on the financial sector in the wake of the royal commission, as he downplayed the immediate relevance of digitisation in solving the problems of the sector.

He said that while the idea of encouraging decisions to be made by a computer program unswayed by a short-term bonus has appeal, it will take human character traits — such as leadership, judgment, a strong ethical and moral compass — to fix the cultural and corporate governance flaws in the sector, that have been exposed in the royal commission.

“The royal commission process has shone a light on the all-too human flaws that have badly tarnished trust in the financial sector,” Mr Byres told delegates at the Finsia Summit this morning.

“The increasing dependence on technology may help address some of these issues, by removing those flaws from some decision-making.

“But it won’t solve the entirety of the problems, at least any time soon.”

Mr Byres said that while both the World Economic Forum and the International Monetary Fund have both said previously indicated that digitisation is the biggest factor changing the financial sector, people are still paramount in getting it right.

“As much as we can all see the amazing advances in technology, people will remain central to the financial system for the time being,” he said.

“Computers might help but, for the foreseeable future, humans will still decide what strategy to pursue, choose which products to offer, select what features they will have, determine how they will be distributed, devise the decision rules by which they are sold, and deal with disputes.”

ANZ technology head Gerard Florian told The Weekend Australian last week that technology had an important role to play in the way customer data is managed within the banking sector.

His comments come after banking royal commissioner Kenneth Hayne slammed APRA in an interim report, saying the prudential regulator was overly concerned with preventing companies from failing and never went to court.

The report exposed the lack of action by the corporate and prudential watchdogs.

While Mr Byrnes said that he would not give a full response to the royal commission, he did say that APRA would need to reflect on its current approach of examining cases of poor conduct as an indicator of risk, but not as a direct prudential risk in and of itself.

He called suggestions by the royal commission for regulators to more actively enforce standards of behaviour within the sector, a “reasonable conclusion”.

“Regulatory initiatives in the pipeline — accountability statements, remuneration restrictions, strengthened governance requirements, greater attention to organisational culture, and more forceful enforcement — will drive change,” he said.

“But to truly generate cultural change within the industry, the task cannot be left to regulators alone.

“As I have said on a number of occasions, regulators can play their part but cannot regulate a good culture into existence.”