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David Murray says more regulation will not improve bank cultures

David Murray says more regulation will not improve bank cultures
Former Commonwealth Bank boss David Murray has told a financial conference it would be counter-productive to introduce laws to improve cultures in banking.

Mr Murray, who also headed the Federal Government's Financial System Inquiry, was responding to comments from Reserve Bank governor Glenn Stevens, who told a Sydney conference that law makers cannot legislate for culture or character in the banking industry.

"Culture has to be nurtured, which is not a costless exercise. Character has to be developed and exemplified in behaviour," Mr Stevens said.

Mr Murray agreed that legislation cannot really play a role in controlling the ethics within an organisation.

"I believe it is counterproductive to attempt to legislate for culture, it is up to individual organisations to get it right and if it is right it can make an enormous competitive advantage to a particular organisation," he said.

He acknowledged that there are limitations to what regulation can achieve.

"If you can't legislate for culture then there is no stick a regulator can use in its place," he said.

Some of Australia's biggest banks, including the Commonwealth, have been rocked by scandals in their financial advisory businesses where millions of dollars of clients money was lost through poor advice.

Mr Murray said that regulators can maintain surveillance of a financial institution, but bank bosses carry the most responsibility.

"The culture is the sum of a set of beliefs in an organisation and those beliefs are driven by the rules in that organisation, by the strategies and the behaviour of its leaders and governing bodies," he said.

Mr Murray said incentives are a part of the industry that need particularly close attention.

"It requires constant oversight to determine whether the incentive system is driving the right or wrong behaviours," he concluded.

Author: finance reporter Elysse Morgan and Sofie Wainwright

1 comment

  • Evan Jones
    Evan Jones Tuesday, 28 April 2015 23:52 Comment Link

    Murray oversaw the further entrenchment of a corrupt culture in the CBA, with his personal contribution the corrupt foreclosure of Commonwealth Development Bank customers as he sought to dismantle the CDB (which was achieved in 1996). As for Stevens, don't mention the Securency scandal.
    Physician, heal thyself!
    There is a way to clean up the culture - hold CEOs and senior line managers personally responsible for corrupt practices under their watch, bring them to court, and impose substantial fines or gaol sentences on them.
    Stop stuffing around with minnow insider traders; go for the big brass.
    Those corrupt cultures will get cleaned up overnight.
    And, by the way, we haven't heard a peep out of Ken Henry, ex-Treasury Secretary, on the NAB Board regarding the NAB's crimes as recently exposed.


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