Client-owned banks under review

The Customer Owned Banking Association has turned to a regulatory expert to assess its own governing principles.

Former ASIC executive Phil Khoury will spearhead a review of the Customer Owned Banking Association’s governing principles. Picture: AAP

The Customer Owned Banking Association has turned to Phil Khoury, the former regulator who reviewed the larger banking industry’s code of conduct, to undertake the latest detailed assessment of its own governing principles.

The Australian can reveal Mr Khoury will conduct a sweeping review of the COBA code of conduct, which aims to be completed by the end of June. The assessment comes against the backdrop of the Hayne royal commission’s final report into the banking and financial services sector and a strong focus on fixing the industry’s failings in prioritising customer outcomes.

Commissioner Hayne’s final recommendations stemming from the inquiry will be submitted to the government by February 1.

COBA, which represents credit unions, mutual banks and building societies, will inform stakeholders of the code of conduct review in a letter to be dispatched today. The customer-owned banking sector represents total assets of almost $116 billion.

Mr Khoury is a former Australian Securities & Investments Commission executive and is now principal of consulting and advisory firm cameron.ralph.khoury.

He also steered a review of the Australian Banking Association’s code of practice, which began in 2016, and has
led an overhaul of that document, which comes into effect on July 1.

While the large banks didn’t implement all of Mr Khoury’s 99 recommendations, the new code of conduct introduces measures to make banking products easier to understand and a stronger commitment to ethical behaviour and responsible lending.

In its terms of reference, COBA wants one part of its code to include a statement of principles on ethical and service expectations while the second section should be “practice rules” that are binding, and detailed rules its stakeholders must meet.

The customer-owned banking sector largely escaped the wrath of the royal commission, which focused on misconduct at larger banks and financial services players.

COBA chief Michael Lawrence said as part of the group’s code review it was “essential” that customers had a plain English commitment to “fair and responsible banking”.

“Mr Khoury has extensive experience in the banking industry and best practice corporate governance. His insights will be invaluable for the customer-owned sector as the regulatory and legal environment continues to evolve in the wake of the financial services royal commission,” Mr Lawrence said.

“The success of our model is demonstrated by our sector’s consistently superior performance on measures of trust and loyalty. Our sector exists to serve the interests of its customers, not shareholders.”

Mr Khoury said: “The review of the code will seek to ensure stakeholders concerns are openly gathered to help guide the final report.”

An issues paper is due to be released by the end of January asking for submissions.

As part of the code, a review is undertaken every five years, with the last assessment occurring in early 2014.