Greg Medcraft's advice to the heads of financial institutions is to accept that "customer regulation" is a reality that is feeding into the formal policy-making and regulatory processes.The Australian Securities and Investments Commission chairman said banks' social licence was a product of customers using social media and other means to communicate their expectations about how the financial services industry should operate.Speaking at the Thomson Reuters Australian Regulatory Summit in Sydney yesterday, Medcraft said that when he started taking about "culture" to directors 18 months ago some of them told him it was not their problem."We have dealt with that issue," he said.Now he is telling those same directors to "care about the crowd."Medcraft said it wasn't so many years ago that benchmark manipulation was considered a "risky but not illegal" activity."The social licence has changed that. In many countries it is now illegal," he said.In response to a question about how regulators knew what the terms of the social licence were, Medcraft said ASIC used an internal guide. It looks at the timeliness of an institution's breach reporting, at the level of customer complaints and how they are dealt with, and how whistleblowers are dealt with."The social licence is what the community expects. Banks need to work to close the gap between the social licence and the legal licence."