A concerning omission from both the ANZ and Westpac ESG presentations over the past couple of weeks was any reference to their compliance with the Banking Code of Practice.
Given the poor code compliance of some banks, as detailed by the Banking Code Compliance Committee in several reports this year, all banks should update their shareholders and customers about their handling of the “standards, safeguards and protections” in the code.
If banks are able to demonstrate good compliance with a set of principles as fundamental as those in the code it would give stakeholders greater confidence that they are serious about meeting the targets they set for themselves in their ESG (Environmental/Social/Governance) statements.
In March, the BCCC called out banks for too often identifying “human error” as the default cause of their compliance breaches, without establishing or acting on the root causes of the problems.
“When a breach occurs for which human error is to blame, it is often the case that staff conduct or actions have been influenced or constrained by internal systems, processes, technology, training or organisational culture,” the BCCC said.
In April, it reported a 160 per cent increase in compliance breaches in the 2019/20 financial year. It acknowledged that the increase was due in part to greater awareness and improved monitoring of code compliance but it said it was time for banks to do more to prevent breaches.
The most common breaches related to privacy and confidentiality, responsible lending, debt recovery, assisting with financial difficulty and staff training to understand the code.
In August, it expressed concern about banks’ failure to consistently make full disclosure of key information to guarantors, a dereliction it says is linked to poor record keeping practices.
The same month, it reported that the banks’ COVID responses were marred by breaches that affected more than 200,000 customers.
Breaches included banks failing to send required notifications to customers, sending notifications late and making processing errors related to assistance packages.
And earlier this month it reported that there were significant problems in the way banks handle direct debt cancellations. It found that around one-third of customer contact with banks about direct debts resulted in incorrect information being supplied.
Taken together, this is a lousy report card. It may be that ANZ and Westpac have exemplary compliance records but their failure to give the code even a passing mention in their ESG reports tarnishes them, deservedly or not.
According to the Australian Banking Association, “the code provides safeguards and protections not set out in the law. It complements the law and, in some areas, sets higher standards than the law. Australian banks continually update the Code of Practice to better meet community expectations. Clear and easy to understand, it outlines protections for all bank customers.”
This is about providing banking services that meet community expectations and delivering them well. As such, the code sits squarely in the “S” of ESG and a bank’s compliance record should be covered under the “G”. Why is that not happening?
The banks’ ESG reports detailed a wide range of developments – some of