No regulating good culture into sector: Byres
Financial services businesses need to implement strong cultural, governance, and remuneration policies if they are to minimise their risk of failure in a crisis, a leading regulator believes.
Speaking at a Financial Services Institute of Australasia (Finsia) panel discussion in Sydney yesterday, Australia Prudential Regulation Authority (APRA) chairman, Wayne Byres, said regulators cannot drive the cultural and governance changes.
"At the heart of this issue of culture in the industry is whether the industry really wants to make it something that's at the heart of strategy," he said.
"As a regulator, I'm certainly not foolish enough to think that regulators can regulate good culture into existence — it just can't happen.
"Ultimately, the industry determines how it wants to behave and the values it wants to uphold, and regulators can only respond to the implications of that."
Byres said that while building up capital liquidity and insuring loss-absorbing capacity in the event of a failure would make the financial system more resilient, it would "only offer a partial remedy… unless there are behavioural changes within financial firms themselves".
AUTHOR
Nicholas O'Donoghue
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